Mexico's new government will honor oil contracts if they are clean: top aide

MEXICO CITY (Reuters) - Oil and gas contracts awarded under the Mexican government’s energy reform will be respected by the incoming administration provided no problems emerge in a review of the tender process, the likely future finance minister said on Wednesday.

FILE PHOTO: Economist Carlos Urzua, picked for finance minister of Mexico's new president Andres Manuel Lopez Obrador, speaks during an interview with Reuters in Mexico City, Mexico July 2, 2018. REUTERS/Ginnette Riquelme

Leftist Andres Manuel Lopez Obrador won Sunday’s presidential election by a landslide. Carlos Urzua, his choice for finance minister when he takes office in December, said energy contracts would be honored if everything was in order.

“If it looks good, on we go. It’s a contract we have to respect,” Urzua told Mexican television.

A former Mexico City mayor, Lopez Obrador has promised to root out corruption, and wants the contracts analyzed to ensure the process was not tainted.

Urzua and other members of the Lopez Obrador team, including his pick for chief of staff, Alfonso Romo, have said they do not expect the review to reveal acts of corruption.

Opening exploration and production of oil and gas to private capital was the centerpiece of outgoing President Enrique Pena Nieto’s economic agenda. The government says contracts worth billions of dollars in investment have been awarded.

Lopez Obrador was an opponent of the 2013-14 energy reform, and has threatened to reverse it. However, his business advisers say they have persuaded him to keep an open mind. Romo said last week more contracts could be awarded.

Before taking office, the new government will negotiate the federal budget for 2019 with the outgoing administration.

When asked to sum up the economic outlook for 2019, Urzua said he expected growth of about 2.5 percent and that inflation would be about “4, between 4 and 5 percent.”

He saw the peso trading around 19 pesos per dollar and the price of Mexican crude at about $70 per barrel.

The peso, which was under pressure before the election, strengthened on Tuesday after Lopez Obrador vowed to work closely with Pena Nieto for an orderly transition.

Urzua said the currency could appreciate if Mexico concluded the renegotiation of the North American Free Trade Agreement (NAFTA) with the United States and Canada this year. That could see the peso trade below 19 per dollar, he forecast.

Lopez Obrador has also criticized the new $13 billion Mexico City airport, which is already under construction. He had threatened to scrap it, but has since held out the possibility of turning into a concession.

Urzua, who was Lopez Obrador’s finance minister for part of his 2000-2005 term as mayor, said it was too early to predict what would happen with the airport, but noted a concession might prove the “easiest” option.

Gasoline prices would rise in future in accordance with inflation, he added.

Reporting by Dave Graham; Editing by Frances Kerry