Mexico's Pemex will not be privatized: President
Mexico's state-owned company, Pemex, will not be privatized but reforms will be enacted to make the energy sector more efficient, Enrique Pena Nieto says
Mexico's energy sector needs reforms that will allow other companies to invest to make it more efficient, but these reforms will not involve the privatization of state monopoly Pemex, Mexico's president said in a speech at London's Chatham House.
"We are not in the process of privatizing Pemex," Pena Nieto said.
"But we need to expand its capabilities. Pemex needs more resources. If we want affordable gas, better production levels, we need to open up to private participations through methods that have been tested in other countries," he added.
He did not elaborate on specific measures, but said the reforms, which were agreed under the "Pact for Mexico" coalition between the country's main political parties, would be discussed later this year.
Mexico nationalized its oil industry more than 70 years ago and Pemex, which says it is the world's fifth-largest crude producer, is the only company that is allowed constitutionally to explore for and extract oil, but lack of funding and know-how have led to a steep fall in production.
Pemex had total sales of $126.6 billion and a net profit of $200 million last year. Its income before taxes and duties was $69.6 billion; it paid $69.4 billion in taxes and duties.
In an interview with the FT earlier in the week, Pena Nieto said that a proposal would be ready in two or three months and that he was convinced the reform would be "transformational."
Mexico has already passed reforms to make its labour sector more efficient, to strengthen the education sector and to open the telecommunications sector to competition.
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"The changes we have achieved so far are encouraging," he said. "This is Mexico's moment, we are experiencing it. This is not rhetoric."
Apart from reform in the energy sector, the current administration also plans to push through a tax reform that would follow a progressive taxation system. "If you earn more, you must pay more," Pena Nieto said.
Mexico, the second-largest economy in Latin America, has one of the worst levels of tax revenue in the region and the lowest in the OECD, at below 20% of GDP. The budget relies on oil taxes for nearly 40% of its revenues, which means it is very dependent on the price of oil.
Another reform will be in the financial sector, to incentivize lending to small and medium sized companies and to individuals, the president said.
Pena Nieto admitted that the "Pact of Mexico" was not free from tensions and disagreements, which he said were "natural" in a democracy, but added that there was willingness to support the reforms.
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