Mexican Presidential Front-Runner Eyes Pemex Reforms

In an interview with Reuters, Carlos Urzua, a respected economist trained at the University of Wisconsin-Madison, said Lopez Obrador was not resolved to end oil and gas auctions started under the current government, but Urzua said major financial investors he had met with were worried about the energy reform.

Urzua had harsh words for Pemex, saying it was neither competitive nor productive enough and adding that its trade union is "an icon of corruption."

"Pemex has to be cleaned up, because if not, we're not going to have a top-flight company," he said.

In office, Urzua said Lopez Obrador's government would aim to run a federal budget that was "more or less" in balance, once interest payments on debt were stripped out.

To meet its other goals of upping investment and pensions, the government would seek to shake up wasteful social spending and curb excessive public sector salaries, he said.

"We're also going to slim down the structures of all the decentralized institutions, including Pemex," he said.

Lopez Obrador holds a double-digit lead in most opinion polls, and his criticism of the economic liberalization carried out under President Enrique Pena Nieto has caused concern among influential sections of the business community.

The centerpiece of Pena Nieto's agenda has been opening up oil and gas production and exploration to private firms. Lopez Obrador has strongly criticized the move, threatening to scrap the reform or at least review contracts awarded under it.

Urzua sought to downplay fears that the energy overhaul, which was based on a change in the constitution, would be overturned.

"The (auctions) wouldn't necessarily be canceled, but they could be halted. Maybe there would be a slower pace," he said.

Urzua, who served as Mexico City's finance minister for part of Lopez Obrador's 2000-2005 mayoralty of the capital, added that he was "sure that the great majority of the contracts awarded" had not been tainted by corruption.

Lopez Obrador has also rattled business leaders by threatening to scrap a $13 billion new airport for Mexico City, which the government says is already nearly one-third complete.

Urzua said foreign investors were not very worried about the airport, noting that its major investors are Mexican.

"But they are worried about the energy sector," he said.

Urzua said he has already held meetings with representatives from over 50 major investors in Mexico, including BlackRock, Pimco, Credit Suisse, Bank of America and Morgan Stanley.