Mexico political dispute delays bank reforms

Mexican president Enrique Pena Nieto has suspended plans to present a new banking sector reform due to a dispute between Mexico’s main political parties, raising doubts about a wider reform agenda that investors are watching closely.

The setback over the banking reform, which was due to be presented on Tuesday, comes as a sweeping telecoms sector bill seeking to curb the power of Carlos Slim’s phone giant America Movil and broadcaster Televisa is very close to full approval.

The dispute is one of the first major challenges to face Pena Nieto, who had drawn up the overhaul that aims to boost lending under a so-called Pact for Mexico he forged with leaders of the opposition to work jointly on reforms.

Cracks in the agreement have appeared due to a funding dispute over July elections in the state of Veracruz, where the opposition has accused Pena Nieto’s government of abusing its power to help his Institutional Revolutionary Party (PRI).

If fighting between the parties intensifies, it could not only endanger the telecoms legislation but also interfere with major fiscal and energy reforms that Pena Nieto aims to pass later this year.

They are central planks of the government’s plan to boost annual economic growth to six percent.

“An instrument like this [pact] is not immune to eventual tensions and political differences,” Pena Nieto said in an address on Tuesday.

“The government will actively contribute to ensuring conditions for dialogue and agreement that we have managed to create together these past months.”

Using ‘blackmail’

In a statement early on Tuesday, Pena Nieto’s office said public activities relating to the Pact for Mexico had been suspended temporarily “to open a space for frank dialogue that allows disagreements to be overcome and strengthen the pact”.

Soon afterwards, senior officials in the main opposition groups, the conservative National Action Party (PAN) and the leftist Party of the Democratic Revolution (PRD), indicated the impasse over the banking initiative could be resolved.

On Tuesday evening, interior minister Miguel Angel Osorio Chong said on Twitter the leaders of the three main political parties had agreed to meet with the government on Wednesday.

“What the PAN and the PRD are doing is using their power to blackmail,” said political analyst Fernando Dworak. “The opposition is trying to limit the PRI’s influence in local elections in exchange for staying at the table on reforms.”

Dworak did not expect the pact to break and saw Tuesday’s move as an effort to safeguard the telecoms bill, which the PRI says should be signed off by Congress by the end of the month.

The PAN said its leader, Gustavo Madero, would not attend the banking reform presentation after accusing the PRI of  using drives to enroll voters in social programs to try to buy votes in Veracruz. The PRD has swung behind the PAN in the scandal.

Veracruz is one of Mexico’s most populous states and one of 14 that are to hold elections on July 7. The PAN also has warned the PRI about intervening in a gubernatorial election due at the same time in the PAN stronghold of Baja California.