In a political about-face, Mexico will now seek 49% private investment in its "secondary" petrochemical plants-instead of the politically controversial outright sale of the plants to investors.
At the same time, however, the plan also entails opening this sector of the petroleum industry to foreign companies to build and operate their own, 100% privately owned secondary petrochemical plants. This will mark the first time private investment has been allowed in Mexico's petroleum operations sector since March 1938.
New plan
Mexico is expected to create 10-15 public-private companies early in 1997 that would manage the secondary petrochemical plants, Energy Secretary Jesus Reyes Heroles said last week. The government will hold a 51% share.
"The most important thing is to ensure that this sector gets what it requires-as much new investment as possible," Reyes Heroles said.
Since 1992, Mexico has had 61 secondary petrochemical plants in the process of privatization, a cornerstone of the current and past administrations' economic policy.
The original plan, which was to generate as much as $3 billion for the government, fell victim to nationalist sentiments and opposition by the government-aligned Institutional Revolutionary Party, among other opponents (OGJ, Sept. 9, p. 25).
Secondary petrochemicals, by the government's description, are a group of intermediate petrochemicals derived from olefins and aromatics currently produced only by state-owned petroleum firm Petroleos Mexicanos (OGJ, Nov. 6, 1995, p. 15). A sizable number of private firms produce petrochemicals further
downstream as well as specialty chemicals in Mexico.
New competition
The administration, which will propose changes to Article 27 of the Mexican constitution, would allow private companies to set up operations and compete with the government in the area of secondary petrochemicals.
The Energy Secretariat, the Federal Competition Commission, and the Commerce Secretariat are to establish regulations governing these private-sector operations.
Any new plants-as well as those incorporated in the public-private partnership-would still have to obtain feedstocks from Pemex.
Nonetheless, the government's decision not to sell the current state-owned secondary petrochemical operations is seen as a means to placate the feverish opposition and regain points with the public.
"I think it is disappointing," says Roberto Salinas-Leon, an economist and director of the Mexico City-based Center for Free Enterprise. "Political interests took over. There's no economic sense to this decision."
Salinas-Leon said the administration has been "wishy-washy" on the sale of secondary petrochemicals, and this is another example of it.
The economist says President Ernesto Zedillo does not want to fight over this issue before the crucial mid-term congressional elections in 1997.
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