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Citizen bonds could raise support for reform
Source: Bnamericas
Date: 04/15/2008 00:00
The so-called citizen bonds included in Mexican President Felipe Calderón`s energy reform bill could help him gain popular support for the proposal, Pamela Starr, an expert on Mexican politics, told BNamericas.
The measure would allow state oil company Pemex to issue bonds for roughly 100 pesos (US$9.50) each. Returns would be tied to Pemex`s performance rather than fixed interest rates.
The bonds are not something Calderón proposed at the last minute to garner additional support, Starr said. The idea has been floated since the end of the previous administration of Vicente Fox.
"But it is absolutely a useful tool when they`re trying to counter [former presidential candidate] Andrés Manuel López Obrador`s [PRD party] argument that this proposal is selling Mexican national sovereignty."
The bonds also would bring in additional financing from sources such as pension funds.
In the medium to long term, the bonds would provide Mexicans with an incentive to support additional reform measures to make the company more profitable.
While the main objective of the measure is to "create the perception the public is a direct stakeholder in the company," the bonds also could pressure Pemex to improve its performance, US investment bank Bear Stearns (NYSE: BSC) said in a statement.
"Issuing performance-linked citizen bonds that are broadly held by the Mexican public could be a way to maintain constant political pressure on Pemex to raise operating performance and increase transparency," the statement said.
The bonds have drawn fire from Mexico`s political left since the reform proposal was presented on April 8. PRD deputy Antonio Soto Sánchez claimed the bond initiative was included merely to garner popular support for the reform measures.
The reform initiatives would allow greater private participation in refining as well as the transport, distribution and storage sectors. The reform also would enable Pemex to sign contracts with performance-based incentives for the private sector.

