Mexico's Ruling Party Expected to Favor Private Investment in Pemex

MEXICO CITY - In what would be a historic step, Mexico's ruling party is expected to modify its political statutes Sunday to allow private investment in state oil monopoly Petroleos Mexicanos and the possibility of the party supporting value-added tax on currently exempt food and medicines.

The proposed changes by the Institutional Revolutionary Party, or PRI, if approved, would give President Enrique Pena Nieto additional maneuvering room as he prepares to submit significant tax and energy overhauls to Congress later this year.

The changes would be a bold move for the PRI, which was formed in the wake of the 1910 Mexican Revolution and became a world pioneer when it expropriated the oil industry in 1938 under former President Lazaro Cardenas.

A PRI member who has access to a draft agreement said the PRI is preparing to support changes in its political platform to recognize a need for "mechanisms to favor a greater involvement of the private sector in the generation of energy," while expressly keeping hydrocarbon resources in state hands. The party member spoke on condition of anonymity.

The proposal amends an article approved in 2008 in which the PRI said the state should maintain the "property, management, control and fruits" of the oil industry under Pemex.

The PRI would reiterate its defense of constitutional articles that establish a national oil industry, the party member said.

A reform to increase private involvement in the oil sector is one of the key promises of Mr. Pena Nieto to unleash economic growth. Government officials estimate an energy reform could add two percentage points to annual economic growth, but critics see it as a transfer of oil income to foreign firms.

Modifications to the PRI's platform are expected to be voted on Sunday during a national party congress in Mexico City where more than 4,000 delegates from all over the country will gather. Mr. Pena Nieto has been invited to the event.

In addition to easing its position on Pemex, the party that ruled Mexico from 1929 to 2000 before spending 12 years in opposition is also expected to erase from its platform the prohibition on supporting value-added tax taxes on food and medicines, an old battle flag of a party that still considers itself center-left.

The expected change is intended to give more margin to Mr. Pena Nieto's government on a tax reform expected to be presented from July, in parallel with the energy reform.

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