Energy industry is a volatile issue for Mexicans

Accustomed to the warm glow of candlelight during temporary blackouts, Mexicans already are aware when officials warn that the nation's energy industry might falter if lots of money is not found to modernize it. Yet they have a deeper fear about keeping the lights on. Schooled on the socialist notion that electricity is part of the national patrimony, they worry that greedy American capitalists will take control and charge them prices they cannot afford.
"The lights and gas for our homes and oil for our cars, it's too important," said Hector Lujan, 44, who works in a bathroom fixture shop on one of the capital's busy commercial avenues. "It's better to keep it out of the hands of foreigners." That is President Vicente Fox's next big challenge: Confronting the idea that only the federal government can be trusted to manage the country's energy needs.

Mexico annually celebrates the day in 1938 when former President Lazaro Cardenas expropriated the oil industry from US and British companies. Butnow Fox is proposing a change in the constitution that would encourage foreign investment in the production of oil, gas and electricity. Fox contends it is the only way to raise $ 5 bn a year to upgrade and maintain the country's neglected and stressed facilities. In his second state of the union speech, the president is expected to designate the proposal as a top priority.
Already, Fox is facing resistance from the Mexican Congress, which has blocked most of his reform initiatives. And he has had to work hard to dispel the notion that his proposal will only profit US entrepreneurs, portrayed by opposition lawmakers as scheming Enron-like executives and in newspaper cartoons as old-style New York capitalists in stove-pipe hats and tailcoats.
"It's not to privatise, in no way to privatise," Fox said. "The solution is in the hands of the state, but yes, [the proposal is] to open the possibility to private investment."

Fears of a power crisis and widespread blackouts have been voiced in Mexico since the 1980s. While some economists believe that Fox is exaggerating the threat, most agree action is needed to prevent serious problems down the road.
Analysts say the recent economic downturn has taken some of the pressure off. But Mexico needs at least a 50 % increase in its electric output over the next 10 years to keep its factories working and its economy growing, they say.
"For the next three to five years, they are protected, but something needs to be done," said Fernando Ramirez, an economic analyst at Mexico Energy Intelligence, an information and consulting firm. "If the economy reactivates, there can be real problems."

The problem is blamed on several factors, mostly neglect by the former ruling government of the Institutional Revolutionary Party, ousted from power with the election of Fox in 2000. Analysts say the PRI failed to adjust its priorities as the economy grew and delayed improvements because of labour disputes and other concerns.
Most of the profits from the state-owned oil industry have been used to pay for social programs rather than reinvestment in infrastructure. And there are allegations that a former oil company director gave $ 170 mm to the PRI's last presidential campaign. Fox is proposing a $ 65 bn investment in oil and gas exploration and the nation's energy transmission and distribution systems. It includes the upgrade of old, oil-powered plants and the development of newer natural-gas plants.
A small amount of private involvement was made legal in 1992, but foreign investors have lacked incentives. Fox's reforms would allow them to generate electricity and set prices for larger "qualified" customers, mostly industries.

The public and political opposition emanates from Mexico's bittersweet experience with private ownership of its oil wells, banks and telephones. But mostly it is rooted in Mexicans' historic pride over having kicked out foreign oil companies so they could manage their resources.
"In primary school history books, children are taught that the nationalization of electricity and oil was one of the hallmarks of Mexican history," said Rogelio Ramirez de la O, an economist. "It is a sentiment consistently seen in opinion polls," he added.
Despite Fox's assurances, some believe the president's real goal is getting private industry's foot in the door. The former Coca Cola executive once openly called for privatisation of oil, and as governor of Guanajuato state in the 1990s, he went to China looking for private investment. In Congress, where a two-thirds vote is needed for constitutional amendments, most lawmakers acknowledge the need for energy reform.

But the main opposition parties signed an accord calling for continued government control as "one of the elements of our sovereignty." "Mexico will not be sold," read signs posted by the Democratic Revolutionary Party at bus stops throughout Mexico City. Ultimately, the reform's fate likely lies with the PRI. The former ruling party still has the largest plurality in Congress, but its leaders appear split on the issue.
Fox has been roundly criticized for bungling his previous attempts to push tax and Indian-rights reforms through Congress. But this time he appears to acknowledge the need for better consensus building. Colleagues in his National Action Party staged a well-publicized meeting with PRI leader Roberto Madrazo, and both sides pledged to negotiate on the proposal. "We are working toward a new relationship with the Congress, a relationship that permits debate but also solutions to the strategic affairs of the country," Fox said.