February 3, 2015 / 4:09 PM / 5 years ago

Mexico president vows probe of his home purchases, contractor deals

MEXICO CITY (Reuters) - Mexican President Enrique Pena Nieto on Tuesday ordered an investigation of home purchases by himself, his wife and his finance minister from government contractors but he fell short of demands for an independent probe into possible corruption.

Mexico's President Enrique Pena Nieto speaks during the oath ceremony for new Secretary of the Public Administration Virgilio Andrade Martinez at Los Pinos Presidential house in Mexico City February 3, 2015. REUTERS/Edgard Garrido

Pena Nieto named a former election official to head the Public Administration Ministry (SFP) and investigate whether he and Finance Minister Luis Videgaray had steered big government contracts toward businessmen who had sold them homes.

The post had been empty since Pena Nieto took office over two years ago, when he proposed replacing the SFP with a more independent anti-corruption body that has yet to take shape.

“I am conscious that these accusations have created the appearance of something improper, something that really did not happen,” Pena Nieto said.

However, the man named to lead the probe, Virgilio Andrade, said minutes after Pena Nieto’s announcement that he would only be looking into the contractors’ deals with the federal government rather than the house purchases, which began before the president took office.

Mexico’s government has struggled to mount convincing investigations of corruption allegations in the past.

A Reuters report last month detailed how investigators at state oil company Pemex [PEMX.UL], in probes managed by SFP officials, disregarded more than 200 cases in which congressional auditors recommended punishment for alleged contract irregularities.

A scandal erupted late last year when it emerged that Pena Nieto’s wife was acquiring a multimillion dollar home in Mexico City from a subsidiary of Grupo Higa, which was part of a Chinese-led consortium that won a $3.75 billion rail contract, which has since been shelved.

Videgaray also bought a home and received a loan from the same company and it emerged that Pena Nieto himself bought a home from a different government contractor.

Both Pena Nieto and Videgaray say they did nothing wrong under Mexican law.

Andrade said on Tuesday that neither Pena Nieto nor Videgaray were directly involved in awarding any contracts and that his investigation will be limited in scope.

“It will not review the purchases of the houses, but the group of contracts agreed between private individuals and the federal government,” he told local radio.

Andrade’s brief includes overseeing ethical guidelines for public servants and establishing protocols governing the relationship between contractors and public servants.

The economy ministry, where Andrade worked previously, said the president’s office was handling requests for interviews with him.

Opposition lawmakers and experts have long argued that Mexico needs to establish independent prosecutors to deal with deeply ingrained corruption.

The scandal has stoked Pena Nieto’s deepest crisis since he took office in late 2012.

He was already grappling with the fallout of the abduction and almost certain massacre of 43 trainee teachers in southwest Mexico last year amid spiraling drug gang violence.

Pena Nieto made light of the pressure on Tuesday when his announcement was met with silence from assembled journalists.

“I know they don’t clap,” he said to his spokesman as he left the podium. Within minutes, his words had gone viral on Twitter as the top trending topic in Mexico, #YaSeQueNoAplauden.

Analysts say the housing scandal could further undermine implementation of major economic reforms seen as key to helping stem a slide in domestic oil output and bolster economic growth.

“There is a sensation of distrust around tenders in which Grupo Higa is immersed, and there are also serious worries and doubts about the president and finance minister with certain players,” said Eduardo Bohorquez, director of the Mexican unit of Transparency International.

Earlier on Tuesday, Videgaray said he would have declared a housing loan from a government contractor if the law required it, and acknowledged he paid less than half the market interest rate on the loan.

He told the Milenio TV channel in comments published in its newspaper on Tuesday that he had an interest rate of 5.31 percent on a loan he received from Grupo Higa to buy a home built by the contractor.

Slideshow (2 Images)

The average home loan rate was around 12 percent in 2012, the central bank’s website shows.

Pena Nieto also announced on Tuesday a series of measures to address possible conflicts of interest in the government, including new reporting responsibilities for federal officials.

He said Mexico needed a new framework to address issues of conflict of interest and appointed Andrade to lead efforts.

Additional reporting by Gabriel Stargardter, Lizbeth Diaz, Adriana Barrera and Tomas Sarmiento; Writing by Simon Gardner; Editing by Richard Chang and Lisa Shumaker

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