* PRI government would seek to tap more foreign investors
* Energy, fiscal reforms top priorities for Pena Nieto
* Campaign chief says PRI will foster competition
By Dave Graham and Anahi Rama
MEXICO CITY, March 16 A government headed
by Mexican presidential front-runner Enrique Pena Nieto would
seek to tap foreign capital markets more and push ahead quickly
with energy and tax reforms if he wins the July 1 election, his
campaign chief said on Friday.
Luis Videgaray, seen by many as a possible finance minister
under Pena Nieto, who belongs to the opposition Institutional
Revolutionary Party (PRI), told Reuters that his candidate was
adamant about the need to boost sluggish domestic lending.
Videgaray noted that the vast majority of Mexican federal
debt was sold in pesos - to the extent that the government
risked crowding out private sector lending. So it ought to raise
the proportion that it sells to foreign investors, he said.
Asked whether a PRI administration, which would begin in
December 2012, would issue more of that debt denominated in
dollars or euros, Videgaray said:
"More in all (currencies). The thing is to take the decision
to be funded more in international markets and less in local
markets in order to free up domestic gold. The thing is (to see)
how far international markets let us get," he added.
Videgaray detailed a range of economic reforms in the
interview that suggested the PRI would be far more
market-friendly in power than it has been since 2000, when it
became the opposition party.
Changes also need to be made to rules governing bank
capitalization and reserves that currently "penalize" lenders,
Videgaray said. And it is vital to create a development bank in
Mexico to spur commercial lending, Videgaray added.
Domestic credit of all kinds provided by the banking sector
was 45 percent of Mexico's gross domestic product in 2010 - far
behind the United States, where the equivalent figure was 231.4
percent of GDP that year. In Latin America's biggest economy,
Brazil, bank lending was more than double Mexico's rate.
Investors are hopeful Pena Nieto, 45, will push through
stalled reforms in Mexico if he is elected.
In recent polls, Pena Nieto had a lead of between 7 and 18
points over his nearest rival, Josefina Vazquez Mota of
President Felipe Calderon's conservative National Action Party
Until the PAN took power in 2000, the centrist PRI ruled
Mexico for more than 70 years, a reign that was often dogged by
accusations of corruption and authoritarianism.
Several of the domestic reform plans outlined by Videgaray
echo measures proposed by the PAN under Calderon and his
predecessor Vicente Fox, whose efforts to overhaul the Mexican
economy were often thwarted by the PRI in opposition.
Videgaray, who served as finance minister in the State of
Mexico when Pena Nieto was governor, said the PRI would seek to
foster competition in all sectors, including the
telecommunication industry that tycoon Carlos Slim dominates.
There is broad consensus in Mexico among the three
main presidential hopefuls on the need to shake up competition,
though progress has been halting due to political standoffs in
Congress, where no party has had a majority for 15 years.
A government headed by Pena Nieto would create special
tribunals to handle competition disputes, which can get bogged
down for years in legal maneuvering in Mexico, Videgaray said.
Another of Pena Nieto's principal priorities to help boost
Latin America's second biggest economy is to improve Mexico's
weak tax take, which has made the government heavily dependent
on state oil monopoly Pemex for revenues.
A fiscal reform might extend to ending a value added
tax exemption on food and medicine, if a way to offset the
impact on the poor can be found, Videgaray added. Politicians,
particularly in the PRI, have been wary of such a move because
about half of Mexico's population lives in poverty.
If the PRI wins the election, it would also push
for quick approval of legislation aimed at liberalizing Mexico's
labor market, Videgaray said. A bill designed to do this has
been stalled in Congress for months, partly due to PRI
"The key issue in the labor market is flexibility," he said.
Turning to foreign policy, Videgaray said ties with the
United States, where Mexico sends nearly 80 percent of its
exports, would be the most important for Pena Nieto.
U.S. efforts to clamp down on illegal immigration, and
Mexican concerns over the treatment of undocumented workers have
vexed policymakers on both sides of the border for years.
Videgaray said the PRI would seek to ease tensions.
"Mexico will be interested in seeing how we can help the
U.S. government to create the political conditions in the U.S.
Congress for immigration reform in the United States," he said.
"Our stance won't be to demand immigration reform, it'll be how
can we help with an immigration reform."
Videgaray also floated the idea that the two sides should
increase cross-border integration in the service sector.
He said one potential example that may be worth exploring is
whether state-backed U.S. welfare programs like Medicaid or
Medicare could be used to pay for some medical services in
Mexico, arguing that the lower cost of treatment south of the
border could result in major savings for U.S. public finances.