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Mexico's Obrador backs private oil, markets ignoring mexican leftist

Julio Cesar Aguilar/AFP

Business elites ignore Obrador despite his lead in polls and backs runner up Ricardo Anaya (in photo) - Watch Video

By Nacha Cattan

Petroleumworld 02 21 2018

Two years after vowing to cancel them if elected, Mexico's leftist presidential candidate Andres Manuel Lopez Obrador appears to be having a change of heart about the oil industry reforms of 2013 that opened the country's energy sector to private investment.

The runner-up in both the 2006 and 2012 elections, Lopez Obrador, 64, has reviewed most of the oil tenders awarded to private drillers and found them to be beneficial for Mexico, his top business adviser, Alfonso Romo, said in an interview.

Amlo, as the current front-runner is known, found the auctions to be well-executed and transparent, Romo said at his Mexico City headquarters of Vector, the brokerage firm he owns. Romo added that not a single company would be nationalized if the candidate wins the election July 1.

“There won't be any legal violation or anything else that would disrupt investor confidence,” Romo said. “What we've seen from the bidding process is that they're very good for the country, they're well done, and up until today we have no complaints.”

While short of a ringing endorsement, Lopez Obrador's nod to investor concerns and backing of the oil contracts represent a break from his past rejection of the deals he said were awarded by an untrustworthy government. Those criticisms stoked concern that Lopez Obrador could cancel oil projects whose total value is as high as $153 billion in long-term investment, according to the Energy Ministry's best-case scenario for all 91 contracts.

Romo, who has sought inroads for Lopez Obrador in the business community, says the candidate has moderated from his pledge two years ago to end Mexico's landmark energy overhaul. Romo insists the front-runner has come around to the need for private funding in the sector, including the possibility of private partnerships for two new refineries he plans on building.

The peso has depreciated 0.9 percent in Mexico City trading today to 18.7080 per dollar.

Anti-Privatization Pledge

Appointed Feb. 15 as chief of staff of Lopez Obrador's proposed cabinet, Romo said the rest of the oil contracts still need to be reviewed because they were just awarded, and will be done so in good faith. Romo says he has no plans to be part of the cabinet should Lopez Obrador win election.

This new-found flexibility, however, has yet to be stated directly by Lopez Obrador, who on Feb. 18 repeated his pledge to stop the privatization of public goods and services, although he didn't mention oil among the examples he gave. It's also left other controversial positions unruffled. Lopez Obrador still insists on moving a $13 billion new airport project that's already underway to a new site that he argues will be far cheaper and prevent the closure of Mexico City's current airport. Lopez Obrador will have to convince investors that even if some money is lost by dismantling the construction site, it'll be recovered with the smaller new project, according to Romo.

Investors have raised concern about the cost of killing such a massive undertaking and of restructuring billions of dollars in debt tied to the new airport. Romo responds that a city as large as Mexico's capital must have two airports in the event of a natural disaster. Downsizing the project will also help Lopez Obrador reach his zero deficit goal, according to Romo.

Read more: Mexico's Ricardo Anaya, second place in polls says he won't be Trump's ‘doormat'

On Venezuela, the front-runner hasn't shifted much either. While Lopez Obrador has said he would not rule like Nicolas Maduro of Venezuela, he's stopped short of criticizing the president. Maduro's policies have brought his country to economic ruin and his crackdown on protests last year, including forcing his opponents into exile, led the U.S. to impose sanctions on Maduro government officials while labeling him a dictator.

“He's been openly saying ‘I have no deals with Venezuela,' ” Romo said. “More, he's not going to say. I would love that he will say it. He will not.”

Romo later said Lopez Obrador's promise that he has no links to Venezuela is enough for him, especially as Mexico needs to focus on solving its own problems before intervening in those of other nations. The issue is a sensitive one because in 2006 Lopez Obrador lost support in polls when he was running for president the first time, after business groups took out ads comparing him to then-Venezuelan President Hugo Chavez.

Story by Nacha Cattan;With assistance by Adam Williams from Bloomberg.

bloomberg.com / 02 20

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