Mexico leftists exit pact, raising hope for deeper energy reform

MEXICO CITY,  (Reuters) – Mexico’s main leftist party said on Thursday it had pulled out of a cross-party pact on economic reform, raising hopes that the government will agree to a more far-reaching plan to attract private investment for the oil industry.

The ruling Institutional Revolutionary Party, or PRI, is hoping its energy reform will spur faster economic growth, and the departure of the Party of the Democratic Revolution (PRD) from the accord is likely to push the debate closer to a more business-friendly proposal backed by the center-right.

Unveiling his plan to shake up the state-controlled oil and gas industry in August, President Enrique Pena Nieto proposed offering investors profit-sharing contracts to try and reverse a slump in crude output, which is down by a quarter since 2004.

But the PRI has no majority in Congress and its natural ally on energy reform, the conservative National Action Party (PAN), has proposed a more radical opening of the oil sector, including concessions and production-sharing contracts.

The PRD has rejected the PRI and the PAN proposals for reform, arguing that Mexico needs to give greater autonomy to state oil giant Pemex.

PRD Chairman Jesus Zambrano said his party had been left out of the negotiating process on energy and would leave the pact definitively unless the situation changed.

“We are out,” Zambrano said after his party had already balked at the negotiations under way over an electoral reform that the PAN has made a prerequisite for its support on the energy bill. “If they don’t correct this, there is no point.”

The exit of the PRD is likely to heighten opposition on the left to the energy revamp, though Mexico’s peso currency  extended gains following the party’s announcement.

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