| MEXICO CITY
MEXICO CITY A multi-party alliance to modernize Mexico's economy will not discuss pending energy and tax reforms until an electoral spat between the opposition and the government is resolved, the head of the main leftist party said on Tuesday.
Jesus Zambrano, chairman of the opposition Party of the Democratic Revolution (PRD), said there could be no talks on these reforms until the government had taken clear steps to punish those responsible for a vote-buying scandal in the Gulf state of Veracruz that was exposed this month.
"There won't be (talks) about anything that is not to do with the political and legal ... structure that will enable us to get out of this impasse," he told Reuters in an interview.
President Enrique Pena Nieto's ruling Institutional Revolutionary Party, or PRI, has been forced on the defensive since the conservative National Action Party (PAN) put out recordings of PRI officials advocating the use of government funds to secure votes in Veracruz in elections due on July 7.
"I tell you, the main responsibility for whether the pact continues lies with the PRI and the government," Zambrano said.
The PAN and the PRD, who signed up to the three-way agreement with the PRI known as the "Pact for Mexico" have said heads must roll over Veracruz for the deal to stay alive.
Pena Nieto, the first PRI president in 12 years, forged the pact to create a platform for economic reform when he fell short of a congressional majority in last year's elections.
The PRI dominated Mexico during the past century, ruling for 71 straight years until the PAN defeated it in 2000 elections. By then, the PRI's name had become synonymous with vote-buying, corruption and a range of other underhanded political tricks.
The opposition has accused the PRI of using Social Development Ministry funds earmarked to fight extreme poverty to buy votes, and Zambrano urged Veracruz's PRI Governor Javier Duarte and Social Development Minister Rosario Robles to resign.
But he stopped short of making their resignations a condition of the PRD continuing in the pact, saying the party would make its decision based on the government's response.
"The country needs the pact, that's why we called it 'for Mexico.' Pena Nieto needs the pact," Zambrano said.
The PAN has said officials involved in the scandal should be "properly sanctioned" if the pact is to retain credibility, and the party identified 57 people at fault. Robles herself dismissed seven officials but denied any wrongdoing.
TIME TO ACT
Pena Nieto has already had to suspend the presentation of a major banking reform due to opposition protests over Veracruz, and Zambrano said the pact's support for that initiative was also on ice until the government resolved the dispute.
If the pact does unravel, it could seriously threaten the most hotly anticipated reforms Pena Nieto is drawing up to boost growth in Latin America's second-biggest economy.
He wants to open state oil giant Pemex to more private investment and improve Mexico's tax take, which is the weakest in the Organisation for Economic Cooperation and Development.
To lure investors into Pemex, Pena Nieto is pushing for a constitutional reform, but Zambrano said the PRD does not believe such a far-reaching measure is necessary.
Instead, he said Pemex should be given more room to maneuver by lowering its tax burden. The firm currently provides around one-third of the federal budget. To make up the difference, the fiscal reform should ensure Mexico's wealthiest companies make a bigger contribution to national coffers, Zambrano said.
The PRD chairman said his party was not dogmatically opposed to co-operation with private companies to help Mexico improve oil output. But he expressed a preference for tie-ups with other state-controlled players like Brazil's Petrobras.
"There are no clear lines in the sand. But the sand belongs to us, to the country," he said, making a nod to the PRD's belief that Mexico's oil must remain the property of the state.
Zambrano also said Mexico should levy a tax on stock market capital gains and dividends. That idea has supporters within the PRI, which is anxious to press on with the fiscal and energy reforms while the main parties are working together.
Some PRI lawmakers believe Congress could convene for an additional session this summer after Veracruz and 13 other Mexican states have held local elections on July 7.
PAN congressman Juan Bueno Torio said there ought to be an extra session in the second half of July to tackle the big reforms before the budget is submitted in September.
"That depends on there not being more dirty tricks," he said, referring to the Veracruz dispute.
(Reporting by Dave Graham and Ana Isabel Martinez; Additional reporting by Michael O'Boyle; Editing by Sandra Maler, Philip Barbara and Cynthia Osterman)