New Mexican leader woos German investors on Pemex

BERLIN Fri Oct 12, 2012 10:23am EDT

BERLIN Oct 12 (Reuters) - Mexican President-elect Enrique Pena Nieto tried on Friday to drum up German interest in his plans to open up national oil company Pemex to the private sector, but faced questions from potential investors about drug violence in his country.

Pena Nieto, who takes office Dec. 1, laid out his plans to deregulate Mexico's labour market and change the law to allow private investment in Pemex at a meeting in Berlin organised by Deutsche Bank, Germany's biggest bank.

The Germans are interested in Mexico, he said, but are concerned about the safety of investments and personnel in a country where a drug war has killed some 60,000 people in the past six years.

"There were some issues. Clearly they wanted to know our strategy on fighting organised crime so that they can be assured of safe conditions," the 46-year-old Pena Nieto told reporters.

But the president-in-waiting, who is due to visit Madrid, Paris and London after Berlin, said his government would work to create a safe and "more modern" framework for investment, including in the sensitive energy sector.

His election victory in July means the return to power of the Institutional Revolutionary Party (PRI), which ruled Mexico for an unbroken 71 years until it was defeated in 2000.

Opening up Pemex to private investors touches a raw nerve among Pena Nieto's party members: it was the PRI that created the oil monopoly in 1938 after it nationalised the oil industry.

Like his support for labour reforms that will make it easier to hire and fire, Pena Nieto's plans for Pemex face opposition from unions and students, some of whom protested in Berlin with banners calling him "Persona Non Grata".

Pemex last month announced plans to invest more than $1 billion over the next three years to upgrade part of its fleet of ships.

PRIVATE SECTOR

"The state will remain the owner of the hydrocarbons because of the economic history of the company, but we will give greater participation to the private sector," Pena Nieto told investors.

He cited the example of Brazil's Petrobras and Colombia's Ecopetrol as state oil companies that had boosted their capacity to invest and improve production by teaming up with the private sector.

"Mexico cannot postpone any longer the experience that other countries have had. By clinging to ideological paradigms we just deny benefits to all Mexicans," he said, adding that he hoped the current "good political climate" would help such reforms.

"It would be best to do this by constitutional reform or, failing that, whatever enables us to reach the goal of increasing Pemex's capacity and contributing to Mexico's energy potential with the participation of the private sector," he said.

He gave no details on how participation in Pemex might be organised or how much of the company might be opened up.

The president-elect spoke with Chancellor Angela Merkel on Thursday about renewable energy, where sector-leader Germany now gets 25 percent of its electricity from wind, solar or biogas, partly thanks to feed-in tariff subsidies.

"Mexico has great potential for renewable energy but the legal framework we have is not conducive to private sector participation," he told German investors.

(Editing by Gareth Jones and David Cowell)