31 October 2008

The politics of energy reform: assessing the winners and losers

The News

All sides in the energy reform debate lauded themselves for accomplishing what had been politically unthinkable a decade ago – and promptly took credit for the approval of a seven-point package that overhauls the state-run oil concern Pemex and allows for increased private sector participation in the petroleum sector.

President Felipe Calderón called the approval of an energy reform package the most import event in the country’s petroleum sector since March 18, 1938, the day foreign oil companies were evicted from the country by then-President Lázaro Cárdenas. Senior officials in the Institutional Revolutionary Party, or PRI, and Democratic Revolution Party, or PRD, made similar pronouncements, but also highlighted their roles in hammering out an agreement that took more than six months to achieve and involved a 16-day takeover of Congress by left-wing protesters, more than two months of hearings over the summer, a partisan referendum and street protests.

Even ardent energy reform foe Andrés Manuel López Obrador claimed some responsibility for his role in forcing lawmakers to water down the original proposal as he told supporters of this petroleum defense movement that their threats, legislative shutdown and street protests resulted in plans being included for a new refinery - to be built with public money - and changes to some of the company’s accounting rules.

But the self-described “legitimate president” rebuked the final reforms due to the lack of a clause forbidding the exclusive management of specific geographic areas by foreign companies.

López Obrador aside, analysts say each of the three big parties won something through energy reform, but perhaps none as much as the PRI.

“The big winner in this is the PRI because its legislative agenda and political agenda is embodied in the final documents,” said Aldo Muñoz, political science professor at the Universidad Iberoamericana.

The PRI, which held the chair of the Senate Energy Commission, unveiled a middle-ground proposal that gained wide acceptance. It proposed scrapping plans for private investment in refineries, storage and pipeline maintenance and discarded the idea of setting up smaller Pemex subsidiaries.

PRI legislators also stayed united throughout the energy reform process, having pacified its more nationalistic factions in the Chamber of Deputies, and protected one of its biggest patrons, the powerful oil workers' union.

“[The union] is a PRI partner and with the PRI winning, the union also wins,” Muñoz said.

Somewhat ironically, some analysts say the deal brokered in Congress contains similarities to a proposal that intransigent PRI lawmakers shot down earlier this decade.

“The least common denominator that we have now is the one that we had several years ago. Everyone agreed that Pemex needed an administrative and a financial reform, that’s what it has,” said Federico Estévez, political science professor at ITAM.

“Four years ago it was impossible because the PRI was unwilling to play ball.”

President Felipe Calderón took pains to point out that approval of an energy reform package marked the fifth major reform to come out of a divided Congress during his administration. Other reforms included changes to state pensions, tax collection, the electoral system and the criminal justice system.

The path to achieving energy reform took a toll on the governing party, however. Calderón appointed his most trusted adviser, Juan Camilo Mourño, as interior secretary in order to foster better relations with Congress. Mourño was almost immediately assailed for allegedly steering Pemex contracts toward a family firm while serving in other government positions earlier this decade. He was eventually cleared of any improprieties, but his role as a mediator was damaged.

The PAN later sacked party Senate leader Santiago Creel in May to give a new “push” to energy reform proposals that appeared stalled. Analysts say that energy reform simply provided a pretext for replacing Creel, who had a history of butting heads with Calderón and angered the party leadership by accepting a debate challenge on petroleum issues from López Obrador.

Energy reform arrived in the Senate mere weeks after the PRD staged a messy internal election, which was eventually annulled by the electoral tribunal. PRD officials spoke of finding unity in rallying against energy reform, but it never really materialized as party moderates disagreed with staging a congressional takeover and avoided participating in López Obrador’s “petroleum defense movement.”

The PRD eventually pitched its own proposals and its members of the Senate Energy Committee take credit for achieving the removal of the provision awarding incentive-laden contracts to Pemex contractors. But López Obrador refused to back the final outcome achieved late last month.

Analysts say the former presidential candidate’s politicking could backfire and strengthen his internal opponents.

“The anti-López Obrador faction … by putting their mark on the reform, they delivered a blow to López Obrador,” said Muñoz of the Universidad Iberoamericana.

“They landed a strong blow to the mobilizations that he leads. His image remains marginal ... and damaged. López Obrador lost his ability to steer the legislative agenda.”

The nation’s five small political parties split on energy reform, with the Convergence party and Labor Party – staunch López Obrador allies – voting against the measure. The Green Party claimed victory for having measures included that promote energy conservation and foment the use of renewable sources of energy.

Muñoz commented that many in the business class with PAN ties would come out as winners due to the expanded role for the private sector. Estévez from ITAM agreed.

“The big winner will be all those little Mexican firms,” he said.

“The next best thing to a government bailout is a government contract. It’s just about business patronage."

25 October 2008

Senate votes for reform

AMLO addresses followers at November 2007 rally.

Senate votes for reform

The News

The Senate approved an energy reform package Thursday, six months after President Felipe Calderón unveiled his controversial plan for overhauling the state-run petroleum sector and stemming a precipitous decline in oil production.

Lawmakers from the three main parties voted overwhelmingly in favor of the seven initiatives comprising the package, which now moves to the Chamber of Deputies.

"It's a success that we've had a civilized Senate debate, producing new rules of the game for a better, more modern and more transparent Pemex," said Sen. Manlio Fabio Beltrones, leader of the Institutional Revolutionary Party, or PRI, in the Senate.

The vote was moved from the Senate chamber to a heavily guarded office tower several blocks away in order to avoid protesters loyal to former presidential candidate Andrés Manuel López Obrador, who has long decried the plan as a first step to privatizing the nation's oil industry.

But López Obrador's protests, which included a takeover of Congress earlier this year and regular street demonstrations by his "oil defense brigades," lost some of their steam after members of his same Democratic Revolution Party, or PRD, opted to negotiate the deal with the PRI and Calderón's National Action Party, or PAN.

The initiatives approved Thursday grant Pemex increased budgetary and operational autonomy; allow the state-owned oil giant to partner with private firms for oil exploration and exploitation ventures; make the company's tendering process more flexible and provide incentives to restart dormant drilling activity in mature oil fields.

But the reforms discarded Calderón's proposals for paying performance bonuses to Pemex's private-sector partners and eliminated another for building new refineries with private money. The reforms also failed to touch the influential oil workers union, which holds five seats on the Pemex board.

Despite the changes, Calderón lauded the Senate-approved package.

"Without exaggerating, I can say that it is the most favorable change in the hydrocarbons sector since 1938," he said, referring to the year the petroleum industry was expropriated.

Analysts described the reforms as an improvement over the status quo, but inadequate for solving the managerial issues in Pemex and arresting production declines.

"This reform is important in providing Pemex with increased autonomy, both financially and operationally," said Alejandro Schtulmann, director of research at Empra, a Mexico City risk consultancy.

"But it falls short in solving Pemex's challenges. The union is a huge problem ... it won't do anything to reverse the decline of [the massive Cantarell oil field.]"

The vote followed six months of discord over energy reform, which has provoked legislative shutdowns, more than two months of public hearings, a partisan citizen consultation process and the threat of López Obrador-sponsored brigades flooding the streets.

A small group of senators representing a coalition of left-wing parties known as the FAP voted against the reforms due to the lack of a clause explicitly forbidding future privatization. They also objected to a measure allowing private firms to win contracts for managing entire production areas on behalf of Pemex.

Deputy Javier González Garza, PRD leader in the Chamber of Deputies, said the two measures would be raised during debate in the Chamber, although he added, "I agree with a large part of the reform."

Debate in the Chamber is expected to begin Tuesday.

05 October 2008

Guerrero´s Sunday votes a litmus test for governor


Guerrero´s Sunday votes a litmus test for governor

The News

Residents of the southern state of Guerrero head to the polls on Sunday in legislative and municipal elections. But rather than being just your run-of-the-mill local political process, the elections are shaping up as a referendum on Gov. Zeferino Torreblanca´s administration <00AD>- and even one on his Democratic Revolution Party, or PRD, itself.

Torreblanca rode to power in 2005 on a wave of discontent that also swept the Institutional Revolutionary Party, or PRI, out of office after 75 years of oppressive rule in the impoverished state.

The Acapulco retailing magnate ran for PRD on an agenda of change in what is one of the republic´s most marginalized, underdeveloped and conflictive states - a place where 40 percent of the homes have dirt floors, 42 percent of the population is illiterate and the murder rate is double that of the national average, according to federal government statistics.

"The election of Zeferino Torreblanca was historic," said human rights lawyer Mario Patrón, who worked in the La Montaña region of Guerrero until recently.

"After more than 75 years of PRI rule, the civil society took to the streets and voted. There were high expectations," Patrón said.

Guererro residents overwhelming opted for turfing the long-ruling incumbent party - not unlike what had occurred on the federal level five years earlier - in a result that one national broadsheet welcomed as, "Moving toward the end of the outlaw Mexico."

But local observers say that the initial euphoria diminished quickly, as few of the expectations that people had - corruption being reduced, education and social programs being fixed, and oppressive governance being stamped out, for instance - began to materialize.

"They´ve just reproduced the same old practices and the same governing policies," Patrón said. "What we have is power being alternated. There´s been a change of colors, but there has not been a transition."

Ironically - but perhaps unsurprisingly, given the left-wing PRD´s divisions stemming from internal elections both nationally and in Guerrero earlier this year - many of the ballots that could be cast against the PRD are expected to come from disaffected party members, who differ with the governor on policy and party politics.

Some in the PRD predict a humbling at the polls for their party, which is expected to lose seats in the state legislature and could lose numerous municipal races - perhaps most embarrassingly in Acapulco, the state´s largest municipality.

"There´s no possibility of the PRD keeping its majority in the legislature," Alvaro Leyva Reyes, a former campaign coordinator for Torreblanca, told the newspaper El Universal.


Making things even tougher, the PRD is now battling a rejuvenated PRI that has been winning local-level elections nationwide over the past two years, and has shown unity in Guerrero after previously being torn apart by infighting there.

Torreblanca, meanwhile, has drawn the ire of some factions of his party for not adequately financially supporting Andrés Manuel López Obrador´s alternative government, as well as working cooperatively with the PAN administration of President Felipe Calderón.

Torreblanca also has butted heads with the PRD mayor of Acapulco, Félix Salgado Macedonio, according to José Luis Rosales, director of the Rural Development Institute at the Universidad Autónoma de Guerrero.

Salgado has accused Torreblanca of sending that municipality inadequate resources for social programs and urban development projects and described the governor as "PANísta to the core," according to Rosales.

With the PRD stumbling, political observers predict a strong showing from the PRI, which sent its big guns to campaign in Guerrero.

Party president Beatriz Paredes and State of Mexico Gov. Enrique Peña Nieto both made appearances. In Acapulco last Sunday, Paredes described the PRI as united and agents of change.

Patrón, the human rights lawyer, expressed skepticism over the PRI´s pledges to carry out change, but acknowledged that the party was on the rebound in his state.

"The PRI is in the process of reconstruction, and it´s most likely that it will win various municipal governments [in Guerrero]," he said. "It´s starting to regain ground, but this isn´t a result of PRI policies. It´s a consequence of the image of poor governance by the PRD."