Mexico's Power Woes Hinder Bush's Plan

By Kevin Sullivan

Washington Post Foreign Service

Friday, March 9, 2001; Page A22

MEXICO CITY, March 8 -- Energy Secretary Spencer Abraham came to Mexico today to underscore President Bush's commitment to "look first to our own neighborhood" to ensure the United States' long-term energy needs.

Like Bush, Abraham offered no specifics about how the United States intended to overcome obstacles ranging from Mexico's constitution, which essentially bans foreign participation in the nation's energy industry, to the country's chronic power shortages.

"We're still formulating what our goals and strategies should be," said Abraham, who met with reporters at the Hemispheric Energy Conference, an annual meeting of energy ministers from 34 nations.

Bush has repeatedly said that a coordinated effort involving the United States, Canada and Mexico is key to his long-term energy strategy, a theme Abraham stressed today on his first official foreign trip. He said Bush "has given me a clear mandate: to work, in the first instance, with our neighbors to meet our energy needs."

That may be difficult. Mexico's energy problems are even more pressing than those faced by California in recent months. Although Mexico is one of the world's largest producers of oil, it imports natural gas from the United States and its dependence on those imports is expected to increase dramatically in the coming years.

Mexico's electricity production cannot keep up with demand.

Power failures are common in urban areas such as Mexico City, and homes in much of the country, where at least 40 percent of the population lives in poverty, are not wired for electricity.

Since Mexico nationalized its oil industry in the 1930s, grabbing millions in assets from many U.S. oil companies in the process, it has been fiercely protective of its energy industry. Keeping foreign investment or participation out of the electric and oil industries has been a point of national pride -- and is written into the constitution.

But Bush is betting on Vicente Fox, the new Mexican president, to change the atmosphere. Fox, a pro-business pragmatist, is pushing to allow foreign investment in the state-owned energy monopolies while stopping short of privatizing them. Easing those restrictions would bring in the money needed to modernize and expand power grids and oil and gas pipelines. But Fox's proposal still must clear the Mexican Congress, where he has many enemies.

Abraham said that the Bush administration would "be respectful" of Fox's legal and cultural restraints. But he expressed hope that Mexico's growing power needs would "lead them in policy directions that would create a lot more opportunities."

"Each nation must decide what is the most appropriate way for it to encourage private investment based on their own history and legal structures," he said in a speech.

Abraham said today's meeting was a first step toward devising ways to surmount the problems between two neighbors whose "pipelines and power lines literally bind us together like a continuous handshake."

Abraham acknowledged, however, that few pipelines and power lines cross the border. For Mexico to become a meaningful supplier of power to the United States, millions of dollars would have to be spent upgrading the means to carry it. In addition, Abraham said, infrastructure on the U.S. side of key border areas is inadequate and would have to be improved.

Abraham said Bush had just signed a permit to allow a new electrical transmission line between Brownsville, Tex., and Matamoros, Mexico, which face each other on the border.

He also said initial discussions were underway to find ways to build other cross-border infrastructure.

© 2001 The Washington Post Company

-- Swissrose (cellier3@mindspring.com), March 09, 2001