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ISSN 1054-8890	Volume 13, Number 24	June 26, 2002
Copyright 1996, Latin America Data Base (LADB) Latin American Institute, University of New Mexico http://ladb.unm.edu
Director: Rebecca Reynolds Bannister
Editor: Carlos Navarro
Staff Writers:
Patricia Hynds, Robert Sandels
                       In This Issue:
   
FOX ADMINISTRATION PROPOSES INNOVATIVE & CONTROVERSIAL
PLAN TO ATTRACT INVESTMENT INTO NATURAL-GAS SECTOR
   * Plan could attract up to US$9 billion to gas sector
   * PRI & PRD says proposal violates Constitution
   * Constitutional scholars divided
   
ELECTORAL COURT ORDERS BANKING COMMISSION TO RELEASE RECORDS
RELATED TO PRESIDENT VICENTE FOX'S PRESIDENTIAL CAMPAIGN
   * Foreign funds said to have entered Fox campaign
   * Court decision limits probe into Labastida campaign
   * Allegations surface against prominent PRI legislators
   
U.S. RENEWS TARIFFS ON MEXICAN CEMENT IMPORTS
   * Mexico threatens to bring issue to World Trade Organization
   
____________________________________________________________
   
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           Energy & mining
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FOX ADMINISTRATION PROPOSES INNOVATIVE & CONTROVERSIAL
PLAN TO ATTRACT INVESTMENT INTO NATURAL-GAS SECTOR
   
     President Vicente Fox's administration has proposed an
innovative and controversial scheme to help Mexico address a
possible shortage of natural gas in the near future.  It would
allow the state-run oil company PEMEX to enter into a series
of contracts (contratos de servicios multiples, CSMs) with
foreign multinational energy companies to explore, develop,
and exploit natural-gas fields in Mexico.
     Demand for natural gas in Mexico is expected to more than
double to 8.4 billion cubic feet per day by 2010, exceeding
production and forcing Mexico to increase imports.  Mexico
could go a long way toward solving the supply problem by
extracting natural gas from the vast reserve in the Burgos
basin, but PEMEX officials said the company lacks the
resources and technology to access those supplies, which are
locked deep in the earth.  The government for several years
has eyed private investment as a means to develop the Burgos
basin (see SourceMex, 1997-08-13 and 1999-01-20).
     Under the plan proposed by the Fox administration, PEMEX
would hire companies to conduct activities like exploration,
development of fields, and extraction.  Any natural gas
obtained in the process would remain the exclusive property of
the oil company.
     Production under the contracts could provide 1 billion
cubic feet of gas per day within three to four years, saving
the government more than US$1.3 billion per year, said Luis
Ramirez Corzo, director of PEMEX subsidiary Pemex Exploracion
y Produccion.
     
Plan could attract up to US$9 billion to gas sector
     Ramirez said the contracts would attract between US$8
billion and US$9 billion in new foreign investment, with the
government expecting to offer its first agreements in
November.  As many as 75 foreign companies have expressed
interest in participating in the project, including major
multinational companies like ChevronTexaco Corp., Royal
Dutch/Shell Group, and BP PLC, and smaller service companies
such as Schlumberger Ltd. and Halliburton Co.
     Some analysts say the natural gas obtained from the
Burgos basin may not be sufficient to meet Mexico's need for
natural gas, especially with the growing demand that will
accompany new construction of electrical power plants.  Mexico
imported 270 million cubic feet of natural gas daily in 2001,
at an annual cost of US$296 million.  And some PEMEX officials
estimate imports could rise to 1.9 billion cubic feet each day
by 2006, at an estimated annual cost of US$2.6 billion.
     
PRI & PRD says proposal violates Constitution
     PEMEX director Raul Munoz Leos said the most significant
aspect of the natural-gas plan is that it helps the state-run
oil company attract investment into the undercapitalized
energy sector while remaining within the guidelines of the
Mexican Constitution.  "We meet 20% of our domestic needs for
natural gas through imports," said Munoz Leos, who reassured
critics that the company is envisioning the scheme only for
natural gas and not for crude oil.
     The major opposition parties do not share the PEMEX
director's interpretation of the Constitution.  The center-
left Partido de la Revolucion Democratica (PRD) and most
members of the former governing Partido Revolucionario
Institucional (PRI) view any involvement of private entities,
particularly foreign companies, in energy-extraction
activities as a violation of Article 27 of the Mexican
Constitution and have threatened to bring the matter before
the high court (Suprema Corte de Justicia de la Nacion, SCJN).
     "The only way for the multiple-service contracts to be
valid is through the reform of the Constitution," said PRD
Deputies Emilio Ulloa and Alfredo Hernandez Raigosa.  The PRD
has also criticized the scheme because it would open up
geological information to foreign companies that until now has
been the exclusive property of PEMEX.
     PRI Sen. Oscar Canton Zetina acknowledged that the
executive has the right to sign contracts without first
seeking authorization from Congress.  But he also cited the
right of Congress to challenge any action that violates the
Constitution.  "We ask President Fox not to sign anything
until the Senate has had a chance to review the plan," said
Canton.
     The PRI is not unanimous in its opposition to the Fox
plan, with Sens. Salvador Rocha Diaz and Natividad Gonzalez
Paras supporting the concept of multiple-service contracts. 
Rocha has proposed a plan in the Senate that limits contracts
to 20 years.
     Fox's center-right Partido Accion Nacional (PAN), which
has come out solidly in support of the plan, said awarding
multiple-service contracts will help ease a financial burden
on PEMEX.  Without the plan, say PAN legislators, PEMEX would
have to finance new production by issuing more bonds on the
international financial markets, an alternative that would be
costly for Mexican taxpayers.  "The multiple-service contracts
could help Mexico come closer to self-sufficiency in energy,"
said PAN Sen. Juan Jose Rodriguez Prats, who chairs the energy
committee (Comision de Energeticos) in the Senate.
     
Constitutional scholars divided
     The question of whether the multiple-service contracts
violate the Mexican Constitution has also divided
constitutional scholars in Mexico.  Some experts like Elisur
Arteaga Nava, author of the book Derecho Constitucional,
expressed doubts that the contracts could even be challenged
before the SCJN because they do not involve concessions or
risk contracts, but rather contracts for services covered
under Mexico's public-works laws.
     Other experts like Victor Rodriguez Padilla, a leading
academic and energy analyst, have taken the opposite stance. 
Padilla said the scheme proposed by Fox could be interpreted
as a move by the government to cede control of the energy
industry, which would make the contracts unconstitutional.
     Energy specialist David Shields, a columnist for the
daily newspaper The News, said Fox may ultimately have to
withdraw or significantly rework the proposal for multiple-
service contracts because of the strong opposition in
Congress.  "Times are gone when the president of Mexico could
make all major reforms on energy and push them through with
the support of his own party," said Shields.  "Now, in more
democratic times, Congress is making sure its voice gets
heard."
     There are some divisions within the Fox administration
regarding the administration's approach to the contracts. 
Economy Secretary Luis Ernesto Derbez told participants at a
trade conference that the Fox government is preparing
guidelines that would require companies that receive the
contracts to hire a certain percentage of Mexican
subcontractors, especially small and medium-sized operations.
"We must end the practice of awarding these turnkey projects
exclusively to foreign interests and leaving out Mexican
companies," said Derbez.
     Ramirez Corzo refuted Derbez's statements, saying the Fox
government has no plans to impose such restrictions on foreign
investors.  "We don't foresee any minimum or maximum levels of
participation for the companies selected to participate in the
contracts," said Ramirez Corso.  (Sources: Notimex, 06/19/02,
06/20/02; The Dallas Morning News, Los Angeles Times,
06/20/02; Novedades, 05/24/02, 06/18/02, 06/20/02, 06/21/02;
La Jornada, 05/28/02, 05/29/02, 06/14/02, 06/17/02, 06/19-
21/02; El Universal, 05/28/02, 06/19-21/02; Milenio Diario,
06/14/02, 06/20/02, 06/21/02; Reforma, 06/19-21/02, 06/24/02;
El Financiero, 06/20/02, 06/21/02; CNI en Linea, 06/19/02,
06/24/02; Agencia de Noticias Proceso, 06/20/02, 06/21/02,
06/24/02; La Cronica de Hoy, 06/20/02, 06/21/02, 06/25/02; The
News, 06/18-20/02, 06/26/02; Associated Press, 06/19/02,
06/26/02)

   
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     Political parties & elections
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ELECTORAL COURT ORDERS BANKING COMMISSION TO RELEASE RECORDS
RELATED TO PRESIDENT VICENTE FOX'S PRESIDENTIAL CAMPAIGN
   
     The controversy surrounding the financing of the 2000
presidential campaigns of Vicente Fox and Francisco Labastida
has turned into a test of the country's banking-secrecy laws.
In a ruling that could have far-reaching implications, the
government's electoral court (Tribunal Electoral del Poder
Judicial de la Federacion, TEPJF) ordered the securities and
banking regulator (Comision Nacional Bancaria y de Valores,
CNBV) to release any bank records related to the Fox campaign,
but deferred a decision on information for the Labastida
campaign.
     Banking secrecy also became an issue during the 1994
campaign, with allegations that the former governing Partido
Revolucionario Institucional (PRI) used the government's
savings protection agency (Fondo Bancario de Proteccion al
Ahorro, FOBAPROA) to finance its presidential and Tabasco-
gubernatorial races.  Former President Ernesto Zedillo
released documents related to those races only after being
ordered to do so by Mexico's highest court (Suprema Corte de
Justicia de la Nacion, SCJN) in October 2000 (see SourceMex,
1999-09-15 and 2000-10-04).
     In the latest case, the CNBV cited banking-secrecy laws
for its refusal to open its books related to the Labastida and
Fox campaigns.  The Instituto Federal Electoral (IFE) had
requested the records to comply with a TEPJF ruling in May of
this year, which ordered a probe of the Fox campaign to
determine if contributions were received illegally from
foreign donors (see SourceMex, 2002-05-15).
     
Foreign funds said to have entered Fox campaign
     Any data released is expected to include documents on
funds channeled through the campaign organization Amigos de
Fox, the president's center-right Partido Accion Nacional
(PAN), and the Partido Verde Ecologista Mexicano (PVEM).  The
PAN and the PVEM formed the coalition Alianza por el Cambio to
promote the Fox candidacy.
     The PVEM has since broken with the PAN and has raised the
possibility of forming an alliance with the PRI in the 2003
midterm congressional elections.
     In an interview, PVEM Sen. Jorge Emilio Gonzalez Martinez
said he was certain that foreign donations were channeled into
to the Fox campaign via the president's campaign organization. 
He recommended that IFE investigators not look for evidence in
the PAN and PVEM accounts, but rather in those associated with
campaign manager Lino Korrodi and other key officials in
Amigos de Fox like Rito Padilla and Carlota Robinson.
     "That is where the clues are about the foreign money,"
said Gonzalez.  "If you scratch below the surface, you will
find ample evidence."
     In an interview with the daily newspaper Novedades, three
Latino organizations in California--the Comite Pro Uno, Club
Leon, and Centro Azteca--also said they received requests for
donations to the Fox campaign from Juan Hernandez, who later
became the president's key official on immigration issues.
     Hernandez, a US citizen, denied the allegations.  "I was
in charge of promoting the president's agenda on immigration
and border issues," said Hernandez.  "I had nothing to do with
raising funds."
     Some IFE officials told the weekly news magazine Proceso
that the institute will also look at documents related to the
Mexico City election for evidence of foreign funds in the PAN-
PVEM campaign.  Current Interior Secretary Santiago Creel
Miranda represented the coalition in the Mexico City race,
which was won by PRD candidate Andres Manuel Lopez Obrador.
     
Court decision limits probe into Labastida campaign
     In attempting to comply with the TEPJF's May ruling, the
IFE also sought to gain access to records related to the
Labastida campaign.
     The TEPJF ruled, however, that the IFE could not
simultaneously request data related to the Labastida campaign. 
The seven members of the electoral court ruled that the two
cases were sufficiently different to warrant a separate
decision.
     The Labastida campaign is under suspicion because some
PRI members are accused of having used public funds, laundered
through the petroleum workers union (Sindicato de Trabajadores
Petroleros de la Republica Mexicana, STPRM), to finance the
PRI's presidential race (see SourceMex, 2002-01-30).
     CNBV president Jonathan Davis Arzac said he would comply
strictly with the TEPJF ruling, which means he will not
release any documents related to the Labastida case.  He said,
however, he would release any documents related to the
Labastida campaign that are authorized by the PRI and STPRM.
     IFE officials said they would continue seeking a legal
means to gain access to the financial records for the
Labastida campaign.  "We will be meeting soon to draft a
strategy to obtain access to data related to the PRI
campaign," said IFE counselor Gaston Luken.
     The center-left Partido de la Revolucion Democratica
(PRD), which stands to benefit from the Labastida and Fox
campaign-finance scandals, lamented the TEPJF's ruling on the
PRI case.  "With the PAN campaign, we're talking about the
illicit use of only 4 million pesos (US$400,000)," said PRD
spokesperson Javier Hidalgo.  "The PRI campaign could involve
as much as 1.5 billion pesos (US$150 million) of public
funds."
     Pablo Gomez, who represents the PRD in the IFE, cited the
need for Congress to amend the legislation on banking secrecy
to allow the IFE easier access to needed information. 
"Changes are needed so that the IFE will not need to go to the
TEPJF to ratify its requests," said Gomez.
     This sentiment was echoed by Miguel Angel Yunes, the
PRI's legal coordinator.  "We must make all our activities
transparent, especially the system of financing, if we want to
gain the confidence of citizens in the electoral system," said
Yunes.
     Davis said the CNBV fully intends to comply with the
TEPJF directive, which has given the banking commission until
July 3 to release any documents pertinent to the Fox campaign. 
But he added that the documents may not be available within
the 10-day framework imposed by the electoral court.  "Some of
this information will have to be released piecemeal," he said.
     
Allegations surface against prominent PRI legislators
     Several new allegations have surfaced relating to the
illegal funding of the Labastida campaign.  The Procuraduria
General de la Republica (PGR) continues to investigate the
case, despite the setback to the IFE from the TEPJF's recent
ruling.  The daily newspaper El Universal said some protected
witnesses who were called to testify before the PGR allegedly
told investigators that some of the PEMEX funds that were
laundered through STPRM also were used to finance the
campaigns of Sens. Manuel Bartlett Diaz and Humberto Roque
Villanueva and Deputy Beatriz Paredes.  These PRI legislators
allegedly received donations in cash.
     One witness said Paredes received 2 million pesos
(US$200,000) in illegal donations, which were used to pay for
public opinion surveys and finance local committees.
     The three legislators denied the charges, accusing the
Fox government of leaking false information.  Roque accused
the government of leaking the allegations to distract from the
probe of the president's campaign.  Paredes was less
confrontational, but urged the administration to keep a
tighter lid on dissemination of information.  "I would like to
see some responsible management of the news so these matters
do not distract from Mexico's democratic transition," said
Paredes.
     Interior Secretary Creel denied the Fox government was
behind the leaks.  "The government had absolutely nothing to
do with these leaks," said Creel, who expressed strong
concerns that some unknown groups were leaking confidential
information.
     The PGR is proceeding on other fronts in the
investigation of the Labastida campaign.  Prosecutors have
asked the US government to freeze the STPRM's account of US$48
million, thought to be part of the money laundered into the
PRI campaign.  The account is housed at Chase Manhattan bank
in New York.
     Authorities have also requested the extradition of former
PEMEX director Rogelio Montemayor Seguy, who is said to have
fled to the US.  Jose Luis Santiago Vasconcelos, director of
the PGR's Unidad Especializada contra la Delincuencia
Organizada (UEDO), said the extradition request has been
presented through Interpol.
     The PGR also raised the possibility that Labastida will
be asked to testify to determine whether he had any knowledge
of the scheme used to fund his campaign.  [Note: Peso-dollar
conversions in this article are based on the Interbank rate in
effect on June 26, reported at 9.98 pesos per US$1.00]
(Sources: Notimex, 06/18/02, 06/20/02; Revista Proceso,
06/23/02; Associated Press, 06/24/02; CNI en Linea, 06/17/02,
06/18/02, 06/25/02; Agencia de Noticias Proceso, 06/17/02,
06/19/02, 06/25/02; Reuters, 06/17/02, 06/24/02, 06/25/02;
Reforma, 06/18/02, 06/19/02, 06/21/02, 06/25/02; Milenio
Diario, 06/14/02, 06/18/02, 06/19/02, 06/21/02, 06/24-26/02
The News, 06/17-19/02, 06/21/02, 06/26/02; El Universal,
06/17-21/02, 06/25/02, 06/26/02; El Financiero, 06/18/02,
06/19/02, 06/25/02, 06/26/02; Novedades, 06/18-20/02,
06/25/02, 06/26/02; La Jornada, La Cronica de Hoy, 06/18-
21/02, 06/25/02, 06/26/02)
   
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           Trade & integration
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U.S. RENEWS TARIFFS ON MEXICAN CEMENT IMPORTS
   
     The US and Mexico continue embroiled in a long-standing
dispute on anti-dumping tariffs imposed by the US Department
of Commerce on imports of Mexican cement.  In March of this
year, the Department of Commerce renewed an anti-dumping
tariff of 51% against imports of Mexican gray portland cement,
a binding agent used to manufacture concrete.  The Commerce
decision, based on data collected between August 1999 and July
2000, primarily affects Mexico's giant cement manufacturer
CEMEX.
     The US first imposed anti-dumping tariffs on Mexico in
1990 and has conducted annual reviews on cement imports since
then.  In every case, the tariff has been renewed, although
the rate has varied between 37% and 109%.
     The tariff has created strong trade tensions between the
US and Mexico, which believes the tariff is unwarranted (see
SourceMex, 1994-08-10 and 2000-10-11).
     Mexico has been unable to force the US to drop the
tariff, even through a dispute-resolution panel formed under
the auspices of the North American Free Trade Agreement
(NAFTA) in 1996 (see SourceMex, 1996-09-18).
     
Mexico threatens to bring issue to World Trade Organization
     The NAFTA panel's negative decision in 1996 does not
preclude the Mexican government from requesting a dispute-
resolution panel at the World Trade Organization (WTO) or
again under NAFTA.  Mexican Economy Secretary Luis Ernesto
Derbez said President Vicente Fox's administration will
attempt to negotiate a solution with the US over the next
three months before considering requesting a new panel.  "If
we are unable to negotiate an equitable solution on the cement
dispute, we will request a panel within the framework of NAFTA
or the WTO," said Derbez.
     Among the demands that Mexico will make in negotiations
with the US will be the return of all or most of the tariffs
on Mexican cement collected by the US government since 1990. 
Derbez was noncommittal about the reimbursement that Mexico is
seeking.  "It will be a high percentage," he told reporters.
     US Commerce Secretary Donald Evans would not comment on
the US position in the negotiations, but said he would respect
the Mexican government's decision to bring the matter before
the WTO.  "When trade controversies arise, it is important to
use the established procedures to find a solution to solve the
disputes," said Evans.  "This is one of the objectives of the
WTO."
     Until a resolution is reached on the cement dispute,
CEMEX is obligated to pay US$15.9 million in anti-dumping
duties over the next year.  But some analysts said CEMEX may
eventually be exporting little, if any, cement from its
Mexican facilities to the US, thus making the tariff question
a moot point.  CEMEX could potentially supply US sources from
its California plant, which it acquired with the purchase of
US cement manufacturer Southdown Cement in late 2000 (see
SourceMex, 2000-10-11).
     The Mexican cement giant, the world's third-largest
cement producer, also continues to expand its global reach. 
In June of this year, CEMEX announced plans to acquire
Trinidad Cement Limited (TCL), based in Trinidad and Tobago
but with plants also in Jamaica and Barbados.  CEMEX would pay
US$413 million for TCL, including the assumption of US$104
million in debt.
     TCL has annual production capacity of 1.85 million metric
tons of cement.  The company sold 1.54 million MT on the
domestic market in Trinidad and Tobago in 2001 and exported
the balance to other countries in the Caribbean.
     In recent years, CEMEX has expanded most aggressively in
Asia, acquiring controlling or partial interest in companies
in Indonesia, Thailand, the Philippines, and India.  The
company has also expanded in northern Africa and Latin America
(see SourceMex, 1999-10-06 and 2001-10-03).  [Sources: Mexican
Intelligence Report, 03/02; La Cronica de Hoy, 06/19/02; CNI
en Linea, 06/18/02, 06/20/02; Reuters, Notimex, La Jornada,
06/20/02; Novedades, 03/15/02, 06/21/02; Milenio Diario,
03/15/02, 06/19/02, 06/21/02; Reforma, 06/20/02, 06/21/02; El
Universal, 06/19/02, 06/21/02, 06/25/02; The News, 06/26/02)