Mexican reform drive bogged down by opposition strife

MEXICO CITY, April 28 Mon Apr 28, 2014 2:27pm EDT

MEXICO CITY, April 28 (Reuters) - In his first year in power, Enrique Pena Nieto raced to push through Congress the most ambitious reforms Mexico has seen in a generation, raising hopes of a new dawn for Latin America's second largest economy.

But this year the Mexican president's sprint has slowed to a walk with Congress mired in opposition disputes that are holding up the legislation that is supposed to end years of anemic growth.

Final approval for bills implementing Pena Nieto's reforms to foment competition in energy, telecoms and broadcasting is now likely to be delayed for weeks or even months, suggesting investment will be pushed back accordingly.

That was not part of the president's original script.

Last year, investors and foreign leaders heaped praise on Pena Nieto after he forged a pact with the opposition to cooperate on reforms, giving him huge majorities to pass bills in a divided Congress.

The pact yielded agreements to end a 75-year-old oil and gas monopoly and overhaul a broken education system as well as measures to improve a weak tax take and create tougher regulations for dominant players like telecoms giant America Movil, the flagship of billionaire tycoon Carlos Slim.

In Mexico, Pena Nieto has received a more sober reception. The economy grew by just over one percent in 2013, and some initial euphoria about his management of Congress is giving way to frustration about the failure to pass bills this year.

"It's come to a standstill as far as I'm concerned. We haven't seen anything concrete yet," said Carl-Otto Rydner, director of the Swedish-Mexican chamber of commerce, whose members include the likes of mobile telecom equipment maker Ericsson and truck manufacturer Volvo.

The so-called secondary laws for the government's overhaul of the telecoms and television markets, which also seeks to pare back the power of broadcaster Televisa, were originally meant to pass by last December.

Instead, they have become tied up in rows about Internet censorship, wrangles over congressional procedure, and fighting within the opposition center-right National Action Party (PAN).

"The opposition have been more concerned with their own problems and maybe even using them to blackmail the ruling party," said Patricio Flores, a lower house congressman from Pena Nieto's Institutional Revolutionary Party, or PRI.

The impasse has ruined the chances of passing the telecoms laws before the current session of Congress ends on Wednesday.

By then, lawmakers had also hoped to approve the secondary laws for the energy reform that was approved in December and is the centerpiece of Pena Nieto's plan to revive the economy.

But those laws have not even reached Congress yet, as the PRI is still thrashing out the secondary laws of an electoral reform that the PAN made conditional for its support on energy.

To relieve the logjam, Congress will call extra sessions and hopes to sign off the pending telecoms and energy bills by the second half of June. But some PRI officials privately express fears that if things go badly, it could take until Congress formally reconvenes in September for the energy laws to pass.

OPPOSITION IN-FIGHTING

Pena Nieto's decision to end the oil and gas monopoly that state oil giant Pemex has had since 1938 still faces opposition, even though he managed to muster a two-thirds majority in Congress to change the constitution at the end of last year.

The PRI only needs a simple majority to pass the secondary laws, but it wants PAN support to blunt efforts by the left to seek a referendum next year to overturn the energy reform.

The PRI lacks a majority in the Senate and has only a one-seat cushion in the lower house with its allies. Despite the margin, the PRI has had strong support from other parties due to the "Pact for Mexico" Pena Nieto struck with the opposition.

In nearly 270 PRI-backed lower house votes last year reviewed by Reuters, they had average support of some 80 percent of lawmakers, without even excluding absentees.

That percentage has fallen only slightly this year, but rising discontent on opposition benches and a leadership battle in the PAN have blocked the advance of the key bills.

The PAN contest has descended into a bitter scrap between party leader Gustavo Madero, who has helped organize support for Pena Nieto's reforms, and former finance minister Ernesto Cordero, who is more critical of the government.

On May 18, the PAN will decide whether to re-elect Madero or choose Cordero. To avoid accusations they are putting the PRI before the PAN, its lawmakers say the party needs to resolve the contest before helping the government pass complex reforms.

Some bills are still advancing, albeit slowly.

PRI and PAN lawmakers said this weekend that Congress could pass the electoral reform just before the regular session ends.

That would pave the way for the secondary energy laws to be presented in the lower house. However, the speed at which the PAN will debate the detailed laws is likely to depend on how fractious the party's leadership election proves.

PAN lawmakers see a risk that the outcome of the election will be disputed. But they also say that the party will stick to its commitment to work with Pena Nieto on economic reforms.

It simply means those reforms will take a little longer than first anticipated, said Jose Trejo, a PAN lawmaker who heads the finance committee in the lower house of Congress.

"There have been a few bruises because of the internal issues," he said. "But the basis of the pact is solid." (Reporting by Dave Graham; Editing by Kieran Murray)

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