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PRI paves way for private investment in Pemex

March 5, 2013

The Institutional Revolutionary Party (PRI) took the first step toward opening up state oil monopoly Pemex to private investment on Sunday by changing party statutes.

For years, PRI statutes meant party members who served in Congress were forbidden from voting on any change in the way that Pemex is run. But at the national convention on Sunday, nearly 5,000 PRI members voted unanimously to alter the party platform and allow support for reform in the sector.

“Let’s show, with attitude, with action and with voice, that we are a new generation of PRI,” President Enrique Peña Nieto told the convention. “This is an assembly of renewal and transformation.”

Since President Lazaro Cardenas nationalized Mexico’s petroleum industry in 1938, Pemex has had exclusive access to Mexico’s oil reserves. Despite being damaged by allegations of corruption, inefficiency and a poor safety record, it remains an important source of national pride and revenue, providing around one third of the government’s annual budget.

The Mexican left has accused the PRI of trying to privatize Pemex, but the government insists that the company will remain in state hands, with reforms focused on modernizing the sector and allowing some private and foreign investment expected to be presented to Congress late this year.

“We share the need of an energy reform for better growth, keeping the state’s control, but modernizing the industry to reach its full potential and making sure the exploitation of our resources benefits everyone,” reiterated PRI President Cesar Camacho on Sunday.

PRI to tax food and medicine?

The PRI also voted on Sunday to remove statutes which prevented the party from permitting value-added tax (IVA) to be imposed on food products and medicines.

Mexico currently has an IVA rate of 16 percent (11 percent along the border with the United States, Belize and Guatemala), but certain items such as food, medicine and books are exempt from this tax.

The PRI is thought to be preparing legislation that would impose a tax on such products, a move that would prove highly controversial and could cause severe inflation.

The strongest criticism of the PRI’s plans has come from the leftist Party of the Democratic Revolution (PRD), with Congressman Francisco Martinez declaring this week that the PRI would stand to lose a lot of votes as taxes on food and medicine would harm the country’s poorest families.

Introducing IVA “will see their income reduced, and although the PRI proposes social support programs, there is no assurance that the funds raised will reach the neediest families or that they will really support their income,” Martinez said.

PRD President Jesus Zambrano also noted that the PRI had ruled out introducing IVA for food and medicine during last year’s election campaign. As an alternative source of revenue, Zambrano suggested that removing tax havens and subsidies would raise “three times more than taxing food and medicine.”

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