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UPDATE 1-Mexico state utility shut due to broad policy-govt
October 13, 2009 / 4:18 PM / 8 years ago

UPDATE 1-Mexico state utility shut due to broad policy-govt

* Utility closure part of broad policy

* Govt wants to make state companies more efficient

(Adds detail, background)

By Robert Campbell

MEXICO CITY, Oct 13 (Reuters) - Mexico’s shutdown of an inefficient federally run power utility is part of a broader policy to make state companies more efficient, the energy minister said on Tuesday.

President Felipe Calderon issued a decree on Sunday to shut down Luz y Fuerza del Centro (LFC), which supplies electricity to Mexico City and surrounding areas, due to its massive operating losses and growing fiscal burden. [ID:nN11549308]

Asked at a news conference whether the government may be planning broad changes at state oil monopoly Pemex [PEMX.UL], widely seen as poorly run, Energy Minister Georgina Kessel did not answer the question directly but said, “This measure is part of our plan to have state enterprises provide their services efficiently and -- I emphasize -- not become obstacles to economic growth.”

LFC has long been criticized by business in the capital region as a burden on industry. [ID:nN24445093]

Kessel said some 1,000 megawatts of power demand, equivalent to the consumption of the border city of Tijuana, had not been met by LFC, holding back Mexico’s economic growth by approximately 1 percent of gross domestic product.

Analysts have hailed the move to shut down LFC as a sign of fiscal discipline in Mexico and a willingness on the part of Calderon to confront entrenched interests in the public sector.

Calderon successfully pushed through an overhaul of public sector pensions early in 2007 but the measures did not touch many state companies, including LFC and Pemex.

Pemex has a huge unfunded pension liability estimated at more than $36 billion at the end of 2008, an amount similar to its long-term debt.

Thousands of workers are still on the Pemex payroll despite the closure years ago of a petrochemical plants where they worked due to the rigidities of their collective bargaining agreement.

However, despite the firing of Pemex’s chief executive in September amid unhappiness with the company’s results, there are few signs that major changes are afoot at the bloated company. (Reporting by Robert Campbell; Editing by Lisa Shumaker)

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