LA JOLLA, CALIF. - The Mexican government needs three to six more months of analysis and political negotiating before announcing a new timetable for privatization of its petrochemical plants, Jorge Eduardo Navarrete, Energy Ministry undersecretary for policy and development, said May 21. In a March 13 policy reversal, the government invoked a North American Free Trade Agreement clause putting private Mexican interests ahead of foreign invest-ors in buying plants producing 13 particular chemicals.
Previously, the government and its oil giant Petr¢leos Mexi-canos had intended to sell the plants in an open international bidding process.
The change in policy and the time delays have dampened the enthusiasm of all potential non-Mexican investors with interest in bidding and drawn attention to the domestic ownership clause in the NAFTA.
The Energy Ministry seeks to divide Pemex's intricately integrated La Cangrejera, Morelos and Pajaritos petrochemical complexes without disrupting their ``productive chains,'' Navarrete said.
Some of the plants produce plastics-related intermediate chemicals such as ethylene.
``The task is to privatize assets in groupings in each of the individual complexes while limiting [ownership] only to those plants that are covered by the NAFTA clause,'' he said.
Navarrete was interviewed following a keynote address at a three-day Latin American Energy Conference in La Jolla.
The puzzle has sent Pemex ``back to the drawing table to analyze new production schemes,'' Navarrete said. Timing of the next step poses ``a difficult legal and economic question. I would say 3 to 6 months.''
Navarrete stressed the needs of ``any successful privatization process'' in Mexico.
``It needs to be based on a sufficient political consensus; it has to have the acquiescence of the oil workers union; it has to be fully transferred; and, above all, it has to meet all legal requirements,'' he said.
The government has underfunded the petrochemical plants for a decade.
``Investment in this industrial branch was way below what was required,'' Navarrete said.
Pemex continues with privatization of the Cosoleacaque ammonia complex, not subject to the NAFTA clause, but the pace and timetable remain vague.
Separately, Adri n Lajous, director general of Pemex, acknowledged the privatization effort is taking longer than expected. He was interviewed following May 20 remarks at the conference's opening session.
The process ``suffers from a complex set of regulations on government purchases,'' he said, and the ``rigidity of the regulatory framework'' was ``made more complex and stringent under NAFTA.''
``I can understand [bidders'] frustration'' with the bureaucracy, but Mexico, in some cases, has been trying ``to negotiate a project [such as the privatization] and a fundamental change of its regulatory framework at the same time,'' Lajous said.
And the task is not getting easier.
``Not even the president of Mexico can say they will open a road long enough to bid and finance'' a workable privatization program, industry consultant George Baker said in a telephone interview from his office in Oakland, Calif.
``In postponing privatization of these plants, the Mexican government is taking a risk on receiving international public-market finan-cing,'' Baker said.
``Sale of the petrochemical plants is the best opportunity to receive financing. The delay could jeopardize financing for the rest of the century,'' he said.
Invoking the NAFTA clause ``is a step backward'' and could cost Mexico dearly, Baker said. Breaking up the complexes will ``preserve the status quo,'' changing the owner but not changing the dynamics.
``It is an advantage to Mexico to have an integrated production chain that a single investor can control,'' he said.
The La Jolla-based Institute of the Americas, the U.S. Commerce Department and two dozen companies and groups sponsored the conference.