March 13, 2014 / 11:46 PM / 5 years ago

Mexico's main opposition party quits energy talks amid graft scandal

MEXICO CITY, March 13 (Reuters) - Mexico’s opposition conservative party on Thursday walked out of talks over the fine print of a landmark energy bill, accusing the government of using a graft scandal to gets its way, in a move that could delay the rollout of the key legislation.

The National Action Party (PAN) lawmakers said they would not return to the negotiating table until their conditions were met, raising the risk that the imminently expected laws will not be approved before the government’s end-of-April deadline.

Mexico’s Congress in December approved a constitutional reform pushed by President Enrique Pena Nieto that ends state oil giant Pemex’s 75-year monopoly on crude production and aims to lure private investment into the ailing energy sector.

The overhaul, which is part of wider batch of modernizing reforms that also includes measures to curb the dominance of telecoms billionaire Carlos Slim, allows for new contractual options for Pemex as well as foreign or private oil companies, including production-sharing contracts and licenses.

However, the so-called secondary laws of the reform, which include details on implementation and regulation, were still being negotiated in Mexico’s upper house until Thursday, when PAN lawmakers abandoned the process.

Jorge Luis Preciado, the head of the PAN in the Senate, said the party believes a scandal involving Pemex, the local subsidiary of U.S. banking giant Citigroup and a Pemex contractor called Oceanografia, was being used by the government to strong arm the PAN.

Former PAN Presidents Felipe Calderon and Vicente Fox ran Mexico when the fraud, which has already caused Citigroup to reduce its previously reported 2013 net income by $235 million, is alleged to have taken place.

“We believe the Oceanografia issue is a method to put pressure on us so that we don’t demand those points that we want, or have already asked for,” Preciado said.

He also said the PRI was negotiating in bad faith, trying to lessen the scope of the secondary laws.

As an example, Preciado said it had been agreed that a proposed national oil fund, and two of the newly empowered regulatory bodies, would have independent board members. But Preciado said the ruling Institutional Revolutionary Party (PRI) now wanted Pena Nieto to appoint the members.

The PRI was able to pass the December energy overhaul, which required a two-thirds majority in Congress that it could not muster alone, thanks to support from the PAN, a long-time supporter of a more market-friendly reform.

But the PRI only needs a simple majority to pass the secondary laws, taking the pressure out of the negotiation process and leaving the PAN with less political capital.

“We’re gone until these two conditions are met,” Preciado said.

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