Fox Renews Call to Privatize Electricity and PetrochemicalIndustries

Tony Abdo aabdo at
Sat Mar 3 17:08:15 MST 2001

Vicente Fox dropped the pretense today, of not working towards the
nationalization of Pemex.

Tony Abdo
MEXICO CITY (Reuters) - Mexico urgently needs fiscal and energy sector
reforms to boost development of its economy, the second-largest in Latin
America, President Vicente Fox (news - web sites) said on Saturday.

Sweeping fiscal reform to reduce heavy dependence on oil revenues is a
top priority for Fox, who took office in December.

Another is to open the electricity and petrochemical industries to the
private sector to finance development needed to meet Mexico's future
power needs.

``These are reforms that cannot be delayed ... which would create better
conditions for accelerated, sustainable growth,´´ Fox said at a
meeting with economic development officials from various states.

In coming weeks, Fox plans to send tax reform legislation to the divided
Congress that would simplify the tax system and eliminate loopholes. One
of the most controversial provisions would extend the 15 percent
value-added tax -- an indirect sales tax -- to food and medicine, which
are now exempt.

Lawmakers from Fox's National Action Party (PAN) have proposed a version
of that plan that would gradually lower the value-added tax to 12
percent while extending it to food and medicine, local newspaper Reforma
said on Saturday.

The PAN bloc's proposal also includes mechanisms to ease the impact on
lower-income taxpayers.

Low Tax Rate
Mexico's tax take is one of the lowest in the region at 11 percent of
gross domestic product. Crude-oil exports represent 30 percent of income
in the federal budget.

Finance Minister Francisco Gil Diaz has said tax reform could increase
the tax take to 13 percent of GNP.

``We estimate 120 billion pesos (about $12.4 billion) in tax income in
the first year from tax reform,´´ Fox said. ``Of that, 40 billion
pesos (about $4.1 billion) goes directly to states and

Energy sector reform is also likely to face stiff opposition in
Congress, where none of the three leading parties holds an absolute

Mexicans have shown fierce opposition to anything that smacks of
privatization of state-run energy companies. Fox has pledged to draw
private investment to the sector without fully privatizing it.

``If we don´t manage to solve this problem of investment in the
sector, in six years we will be practically on our knees asking the
United States to sell us, please, electricity, diesel, gasoline, natural
gas,´´ Fox said.

Mexico needs an estimated $50 billion in investment to develop energy
infrastructure needed to satisfy demand for the next decade, officials
have said.

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