* Mexico's President sends education reform to Congress
* Reform would strip teachers' union of key placement power
* Reform has backing of major parties
By Alexandra Alper and Lizbeth Diaz
MEXICO CITY, Dec 10 (Reuters) - Mexico's new president unveiled a planned overhaul of the country's struggling education system on Monday in a challenge to the powerful teachers' union, which has long been seen as an obstacle to progress.
Addressing teachers at a ceremony in Mexico City, President Enrique Pena Nieto laid out a proposal that would champion merit-based teacher promotions and chip away at the union's power to hire teachers on its own terms.
"Your rights will be safe because your income, tenure and promotion will not be subject to discretionary criteria," said Pena Nieto, before signing the proposal that he promised to send to the lower house of Congress later on Monday. "Good teachers will have the opportunity to advance based on their professional merits."
Led by Elba Esther Gordillo, widely seen as one of Mexico's most powerful politicians, the big union has for years blocked attempts at education reform and influenced the outcome of elections.
Pena Nieto, 46, took office on Dec. 1, returning to power his centrist Institutional Revolutionary Party, or PRI, after 12 years in the opposition, promising to push a sweeping reform agenda. No party holds an outright majority in Congress.
The education reform is part of a broader pact signed by the country's top parties a day after the President's inauguration. The pact aims to break through years of political gridlock in Congress and tackle three major reforms: increase competition in Mexico's telecommunications sector, improve the management of local government finances, and modernize the education system.
A key complaint about the country's schools is the teachers' union's authority to dole out positions according to its own criteria - through inheritance or even sale of positions.
"No more promotions for loyalty, (or) cronyism with union leaders," said Jesus Zambrano, who heads the leftist opposition Party of the Democratic Revolution (PRD). "Let's have promotion be based on teacher merit and professionalism."
Poor education standards are frequently blamed for holding back Latin America's second biggest economy.
While Mexico has made marked strides in educational achievement, its students lag other industrialized nations, especially in mathematics and science, according to a 2011 survey by the Organisation for Economic Co-operation and Development.
The reform is likely to pass Congress since it already enjoys backing from the major parties. But the teachers may push back hard against the changes.
A former PRI grandee who broke with her old party before the 2006 general election, Gordillo was re-elected in October and escaped a recent bid by the conservative National Action Party (PAN) to impose more transparency on the country's unions that would have weakened her position.
The PRI had strong ties with the union during the 71 years it ruled Mexico before the PAN ousted it in a 2000 election.
There have been mounting calls for Gordillo's removal as union leader but "la maestra" ("the teacher") has a tight hold on a small party the PRI needs for votes and it is unlikely to cooperate with Pena Nieto if his government tries to oust her.
The reform, according to politicians at the event, includes measures aimed at giving more autonomy to schools, voiding promotions not based on merit, and launching a nationwide survey to register teachers and students.
It also would grant independence to an organization charged with evaluating the educational system.
"We all agree on a central point: we urgently need to reform and modernize the legal framework for higher quality, more equitable education," said Pena Nieto.