Short of a majority in Congress, Pena Nieto’s Institutional Revolutionary Party (PRI) is likely to need support from the conservative National Action Party, or PAN, to see through plans to overhaul state oil giant Pemex and broaden the tax base.

But the PAN has been mired in a power struggle since it lost the presidency last year, and tension has risen steadily over disagreements on how much the party should support the president’s efforts to reform Latin America’s No. 2 economy.

That friction boiled over this weekend when PAN Chairman Gustavo Madero said he would strip former Finance Minister Ernesto Cordero of his role as PAN Senate leader, leading to a tense exchange live on national television on Monday.

“The PAN can’t be a satellite of the PRI,” Cordero told a news conference in the Senate shortly afterwards.

Madero, 57, has sought to honor a pact he and the leader of the leftist Party of the Democratic Revolution (PRD) made with Pena Nieto to cooperate on reforms, but the PAN’s wing around Cordero has been wary, making it harder for bills to pass.

Things came to a head last week when Cordero said he would put forward an initiative for political reform in Mexico with the PRD in the Senate – just days after Madero had presented his own proposal for the PAN to the lower house of Congress.

An angry Madero responded by saying the party unity was at risk ahead of 14 state elections in July, and he announced that Cordero’s role in the Senate would be reviewed Tuesday.

In the end, Madero decided to change the Senate leadership before the weekend was over, despite a letter signed by 24 of the PAN’s 38 senators in support of the 45-year-old Cordero.

“DANGEROUS DEVOTION”

The strife has accentuated the divide between PAN lawmakers willing to work with the PRI – which often stymied reforms when the PAN held power – and those who believe the party must mount a robust opposition to Pena Nieto or risk becoming irrelevant.

If an obstructionist position gains the upper hand in the PAN, Pena Nieto’s bid to change the constitution to make oil company Pemex more attractive to outside investors will become harder, as will his hopes of carrying out a far-reaching tax reform.

The PRD opposes a constitutional change to shake up Pemex and has spoken out against some measures under consideration to boost tax revenues, like levying value-added tax on food.

Other bills like a reform to spur greater lending by banks, as well as measures needed to implement wholesale changes to the telecoms sector and the education system, also hinge on Pena Nieto’s ability to keep the opposition parties on side.

On Monday, Madero and Cordero locked horns on air, with the latter sitting stone-faced in the studio of broadcaster Televisa as Madero tersely stated via telephone that he had been within his rights to remove the younger man from his post.

The party chairman hung up shortly afterwards, leaving Cordero to accuse Madero of breaking his word and having acted in an “authoritarian” and “anti-democratic” manner by going over the heads of a majority of the PAN in the Senate.

“This confirms that we’re closer to the PRI in the PAN than we have ever been,” said Cordero.

Many of the Senate group around Cordero are close to former President Felipe Calderon, who left office in December but remains an influential figure behind the scenes in Mexico.

One of the senators, Calderon’s former private secretary Roberto Gil, wrote in newspaper Excelsior on Monday that Madero was showing a “dangerous devotion” to Pena Nieto.

Former PAN labor minister, senator Javier Lozano, another Calderon loyalist, attacked Madero immediately after his cross words with Cordero saying on his Twitter account that the party chairman’s conduct had been “embarrassing.”

(Reporting by Dave Graham and Miguel Gutierrez; Editing by Cynthia Osterman)

Opposition leaders said they had agreed on new measures with President Enrique Pena Nieto’s ruling Institutional Revolutionary Party (PRI) to preserve the pact, which is aimed at fueling growth in Latin America’s no. 2 economy.

“Contrary to doubts, the Pact for Mexico is in effect and is being maintained. Work is resuming,” Pena Nieto said.

Traders said the peso firmed on optimism about the rapprochement, and Finance Minister Luis Videgaray said via Twitter that Pena Nieto would present on Wednesday a financial proposal that was derailed by the spat.

Talks had stalled between the parties after a dispute in April over leaked video recordings showing members of the PRI advocating the use of Social Development Ministry funds to buy votes in the Gulf state of Veracruz.

Veracruz is one of 14 states that will hold local elections on July 7.

The conservative National Action Party’s (PAN) chairman, Gustavo Madero, said leaders had agreed on an “addendum” to the pact aimed at boosting transparency and limiting corruption. He said his party would denounce any anti-democratic acts by the government.

“The PAN is conscious of its responsibility to take part in the Pact for Mexico because its reform agenda will benefit Mexicans … But it is also conscious of its responsibility to stop authoritarianism taking hold,” said Madero.

The PRI, a byword for corruption and election rigging during seven decades in office, signed the pact with leaders of the leftist Party of the Democratic Revolution (PRD) and the PAN in December when Pena Nieto ushered the PRI back into power.

The pact has helped Pena Nieto steer through major bills to improve the education system and to bring more competition into Mexico’s closed phone and television markets.

Measures aimed at boosting the country’s paltry tax take and overhauling the state-owned oil monopoly Pemex are on the agenda for later this year.

(Editing by Simon Gardner and Mohammad Zargham)

A pact that Pena Nieto painstakingly built with opposition
leaders to strengthen his hand in Congress risks falling apart
over accusations his ruling Institutional Revolutionary Party,
or PRI, has been using dirty tricks to buy votes in the first
major round of state elections since July’s presidential vote.

Taking office in December after fighting off claims that his
own campaign team bought votes, Pena Nieto has won much praise
for his efforts to re-energize Mexico’s economy.

A telecommunications bill passed by Congress on Tuesday aims
to bring more competition to industries dominated by phone
tycoon Carlos Slim and the No. 1 broadcaster, Televisa.

Pena Nieto’s government has also pushed through a law aimed
at improving the education system and arrested teachers’ union
boss Elba Esther Gordillo on corruption charges. A former PRI
stalwart, Gordillo was seen as a persistent obstacle to change.

Lacking an outright majority in Congress, Pena Nieto mapped
out an informal legislative program with the opposition under
the “Pact for Mexico,” an agreement that has served as a
workshop for the parties’ proposals to modernize the economy.

If his reforms succeed, Pena Nieto insists Mexico’s growth
can reach 6 percent per annum. Investors have been encouraged by
the pact’s achievements, piling into Mexican stocks and bonds
and recently pushing the peso currency to a 19-month high.

But last week, months of political goodwill evaporated amid
angry recriminations when opposition leaders accused the
government of trying to use public money to help the PRI in
local elections in the Gulf state of Veracruz this July.

When videos were leaked showing PRI officials advocating the
use of Social Development Ministry funds to corral votes in
Veracruz, the conservative National Action Party, or PAN, and
the leftist Party of the Democratic Revolution (PRD) were livid.

“The one that’s been irresponsible, that hasn’t kept its
word, that has put the Pact for Mexico at risk and shown it’s
still the same old party it always was, is the PRI,” said the
PAN’s lower house leader, Luis Alberto Villarreal.

For Pena Nieto, the row is an unwelcome backdrop for the
visit of U.S. President Barack Obama to Mexico on Thursday, when
the leaders will discuss security issues and how to step up
cooperation between their closely intertwined economies.

FRUSTRATED OPPOSITION

Ruling for 71 uninterrupted years, the PRI had become a
byword for corruption by the time it was finally voted out of
power in 2000. When Pena Nieto recaptured the presidency for the
party last year, he swore things would be different this time.

But as the parties jockey for position before the local
elections in Veracruz and 13 other states on July 7,
finger-pointing about PRI corruption is again widespread.

Until the PRI has punished those behind the Veracruz scandal
and ensured the elections are protected against abuses, all
discussions within the pact over energy and fiscal reform are
off, PRD chairman Jesus Zambrano told Reuters.

Though he was confident the pact could overcome the current
furor, Zambrano foresaw trouble ahead if it did not. “It would
make building consensus enormously difficult,” he said.

Defusing tensions between the PRI and its rivals is a big
enough challenge for Pena Nieto. But he must do so at a time
when there are major splits inside the opposition parties – in
particular the PAN – his natural allies on economic reform.

Without support from at least the PAN, Pena Nieto’s ruling
coalition of PRI and the Green Party is unlikely to muster the
two-thirds majority in Congress needed to enact a constitutional
change he wants to make Pemex more attractive to investors.

The PRD is opposed to changing the constitution to open up
the oil industry and is highly skeptical about imposing a
value-added tax on food and medicine, a measure the PRI is
considering to improve Mexico’s weak tax revenues.

Meanwhile, both the PAN and the PRD are pressuring Pena
Nieto’s Social Development Minister Rosario Robles to step down
over the Veracruz revelations. To date, they have not made her
departure a condition of their support for the pact.

The parties were incensed when Pena Nieto last month backed
Robles publicly, withdrawing their support for a banking bill
negotiated under the pact, and putting that reform on ice.

“It’s up to all the political players to carry on working
for the reforms our country needs,” Pena Nieto said at the time.

The opposition says, however, that the PRI has yet to atone
for Veracruz. Robles quickly dismissed seven officials over the
affair and has denied any wrongdoing, but the PAN and the PRD
have said 57 people were involved and want more heads to roll.

The government has repeatedly stressed that the pact is
intact, but opposition lawmakers chafing under the fetters of
the agreement have jumped at the chance to attack the president.

Senator Luis Fernando Salazar of the PAN said Pena Nieto’s
response to the Veracruz affair showed that he saw the pact “as
nothing more than an instrument for keeping the opposition
quiet.”

Even among the ranks of the ruling coalition, doubts have
grown about how much longer the government can defend the pact.

“It was very close to breaking,” said PRI congressman Brasil
Acosta, noting the media attention the pact has generated had
turned it into a very public forum for lawmakers to air
grievances, making it harder and harder to defuse spats.

Another lawmaker in the ruling coalition, who declined to be
named, said the pact would last till the end of 2013 “at best.”

Pena Nieto used the accord to push through the education and
telecommunications reforms with overwhelming support from the
PRI, PAN and PRD. But that spirit of cooperation has given way
to warnings that the pact risks neutering the opposition.

BAJA CALIFORNIA

There is no suggestion Pena Nieto was personally involved in
the PRI’s election planning for Veracruz, but preserving the
pact is exacting a mounting price in Congress, which must still
agree on laws to implement the telecoms and education bills.

Mindful of the risks, Pena Nieto front-loaded his major
reforms, pledging to sign off the reorganization of Pemex and
his plan to broaden the tax base by the end of the first year.

Ulises Beltran, head of polling firm BGC, said in the end
Pena Nieto’s hopes of passing far-reaching energy and tax
reforms were almost certain to depend on the PAN.

How helpful the PAN is may hinge on who wins the only state
governorship up for grabs in July: Baja California. In 1989, it
was the first state the PAN ever captured and it still holds it.

Losing Baja California would be a crushing blow to the PAN,
which is still licking its wounds after giving up the presidency
to Pena Nieto and finishing a distant third in last year’s vote.

Anxious to avoid defeat, the PAN is running on a joint
gubernatorial ticket with the PRD in Baja California and has
already said the PRI will try to buy the election.

The only problem, said pollster Beltran, is that after 24
years under the PAN, the state is ready for a change.

“And if (the PAN) ends up losing in Baja California, they’re
going to claim there was fraud without a doubt,” he said.

Jesus Zambrano, chairman of the opposition Party of the Democratic Revolution (PRD), said there could be no talks on these reforms until the government had taken clear steps to punish those responsible for a vote-buying scandal in the Gulf state of Veracruz that was exposed this month.

“There won’t be (talks) about anything that is not to do with the political and legal … structure that will enable us to get out of this impasse,” he told Reuters in an interview.

President Enrique Pena Nieto’s ruling Institutional Revolutionary Party, or PRI, has been forced on the defensive since the conservative National Action Party (PAN) put out recordings of PRI officials advocating the use of government funds to secure votes in Veracruz in elections due on July 7.

“I tell you, the main responsibility for whether the pact continues lies with the PRI and the government,” said Zambrano.

The PAN and the PRD, who signed up to the three-way agreement with the PRI known as the “Pact for Mexico”, have said heads must roll over Veracruz for the deal to stay alive.

Pena Nieto, the first PRI president in 12 years, forged the pact to create a platform for economic reform when he fell short of a congressional majority in last year’s elections.

The PRI dominated Mexico during the past century, ruling for 71 straight years until the PAN defeated it in 2000 elections. By then, the PRI’s name had become synonymous with vote-buying, corruption and a range of other underhanded political tricks.

The opposition has accused the PRI of using Social Development Ministry funds earmarked to fight extreme poverty to buy votes, and Zambrano urged Veracruz’s PRI governor Javier Duarte and Social Development Minister Rosario Robles to resign.

But he stopped short of making their resignations a condition of the PRD continuing in the pact, saying the party would make its decision based on the government’s response.

“The country needs the pact, that’s why we called it ‘for Mexico’. Pena Nieto needs the pact,” Zambrano said.

Pena Nieto has said opening up state oil giant Pemex and improving Mexico’s weak tax take are vital to spur stronger growth in Latin America’s second biggest economy.

(Reporting by Dave Graham and Ana Isabel Martinez; Editing by Sandra Maler and Philip Barbara)

However, the bill, one of the main planks of a reform drive
that President Enrique Pena Nieto hopes will boost economic
growth in Latin America’s no. 2 economy, must return to the
Senate after lawmakers called for a small change in language.

The shake-up of the industry encourages more foreign
investment in the telecoms sector and gives regulators the power
to stop companies from controlling more than 50 percent of the
market, a measure aimed directly at Slim and Televisa.

Slim’s phone company America Movil controls some
80 percent of the fixed line business and about 70 percent of
the mobile market. Televisa has more than 60
percent of the television market.

If companies are declared dominant by the competition
regulator, forced asset sales will not be automatic, though.

The legislation mandates the creation of a new regulator,
known as Ifetel, which will oversee the telecoms market. The
reform also outlines the shape of a new federal competition
commission, which will regulate all other areas.

Last week, the Senate amended the bill to stipulate that
companies that are fined or told to sell off assets by the new
federal competition commission would have the right to lodge
appeals to suspend decisions by the regulator. Companies have
used the tactic in the past to fight competition rulings.

Lawmakers on Thursday amended that very section of the bill,
replacing two words with one to make clear that those appeals
could only be lodged against fines and orders to divest assets.

However, Televisa and America Movil will be subject to
Ifetel, not the federal competition commission, hampering their
ability to contest regulatory rulings.

The Senate is expected to approve Thursday’s change early
next week, before the current session of Congress is over. If
the amended article is changed again by the Senate, the
remainder of the legislation can be passed without it.

Once he has signed off the telecoms bill, Pena Nieto faces a
challenge to push through major fiscal and energy reforms.

Uncertainty over the final details of the bill has been
dragging on the share prices of America Movil and Televisa.

America Movil Chief Executive Daniel Hajj said on Friday the
new law was likely to mean the company would be determined a
dominant player as it published its results.

The dispute is one of the first major challenges to face Pena Nieto, who had drawn up the overhaul which 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, or PRI.

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.

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 6 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.”

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 afterward, 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.

PACT WORRY

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.

Social Development Minister Rosario Robles, a former member of the PRD, has come under fire because of the dispute, which arose after recordings came to light showing officials suggesting welfare programs could be used to help the PRI in Veracruz.

Robles subsequently dismissed seven officials. Opposition lawmakers have called for her head and were angered when Pena Nieto backed her publicly last week.

“The response of President Enrique Pena Nieto … constitutes carte blanche for election miscreants. These hurt and contradict the contents and aim of the Pact for Mexico,” PRD Chairman Jesus Zambrano said in a statement late on Monday.

Since Pena Nieto unveiled the Pact for Mexico days after taking office in December, it has formed the foundation of his government’s main reform efforts, including a shake-up of the education system and the telecommunications bill.

BILL TO PROCEED

Investor optimism about the prospects for reform in Mexico have helped strengthen the peso currency to its highest level in more than a 1-1/2 years in the last few weeks.

“If (Pena Nieto) maneuvers out of this situation, the Pact for Mexico would be strengthened. Under this scenario the potential for a rally in rates and FX might actually accelerate,” Benito Berber, a fixed income strategist with New York-based Nomura Securities, said in a research note.

“For now we think only one thing is certain, some cracks in the pact have appeared,” Berber said.

The Mexican peso brushed off the dispute on Tuesday, and traders and analysts said many investors who piled into bets on assets due to reform optimism were expecting bumps in the ride. Still, further political complications could hurt the currency.

“Much of the (peso’s gains) have been due to favorable expectations (on the reforms). If the expectations change, it will change the market trend,” said Alfredo Puig, a trader at brokerage Vector in Monterrey.

Still, Finance Minister Luis Videgaray said in a radio interview on Tuesday that the financial reform bill should be introduced “in the next few days.”

Jesus Ortega, former chairman of the PRD and a member of the pact’s presiding board, told Reuters the reform would proceed once the inter-party disputes are settled.

“It’s not about the (new) law,” he said.

Marco Antonio Adame, a PAN member of the board called the president’s announcement “a positive signal.”

(Additional reporting by Miguel Gutierrez, Michael O’Boyle and Ana Isabel Martinez; Editing by Simon Gardner, Andrew Hay and Mohammad Zargham)

The dispute is one of the first major challenges to face Pena Nieto, who had drawn up the overhaul, which 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 upcoming 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, or PRI.

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.

If fighting between the parties intensifies, it also could 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 6 percent.

In a statement, 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 afterward, 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.

“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.

PACT WORRY

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 holds 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.

Social Development Minister Rosario Robles, a former member of the PRD, has come under fire because of the dispute, which arose after recordings came to light showing officials suggesting welfare programs could be used to help the PRI in Veracruz.

Robles subsequently dismissed seven officials, but opposition lawmakers have called for her head and were angered when Pena Nieto backed her publicly last week.

“The response of President Enrique Pena Nieto … constitutes carte blanche for election miscreants. These hurt and contradict the contents and aim of the Pact for Mexico,” PRD Chairman Jesus Zambrano said in a statement late on Monday.

Since Pena Nieto unveiled the Pact for Mexico days after taking office in December, it has formed the foundation of his government’s main reform efforts, including a shake-up of the education system and the telecommunications bill.

BILL TO PROCEED

Investor optimism about the prospects for reform in Mexico have helped strengthen the peso currency to its highest level in more than a 1 1/2 years in the last few weeks.

“If (Pena Nieto) maneuvers out of this situation, the Pact for Mexico would be strengthened. Under this scenario the potential for a rally in rates and FX might actually accelerate,” Benito Berber, a fixed income strategist with New York-based Nomura Securities, said in a research note.

“For now we think only one thing is certain, some cracks in the pact have appeared,” Berber said.

Still, Mexican Finance Minister Luis Videgaray said in a radio interview Tuesday morning that the financial reform bill should be introduced “in the next few days.”

Jesus Ortega, former chairman of the PRD and a member of the pact’s presiding board, told Reuters the reform would proceed once the inter-party disputes are settled.

“It’s not about the (new) law,” he said.

Marco Antonio Adame, a PAN member of the board called the president’s announcement “a positive signal.”

(Additional reporting by Miguel Gutierrez and Ana Isabel Martinez; Editing by Simon Gardner, Theodore d’Afflisio and Bill Trott)

Pena Nieto had been negotiating the banking overhaul aimed
at boosting credit under a pact he forged with leaders of the
opposition to work together on major economic reforms, but
cracks in the agreement have appeared due to a political dispute
over election funding.

The impasse over finances comes at the same time as a
sweeping telecoms sector reform, aimed at taming market
heavyweights like billionaire Carlos Slim’s telecoms giant
America Movil, is in the final stretch toward full approval.

If the spat deepens, it also could interfere with the
government’s landmark fiscal and energy reforms that the
government hopes will boost annual economic growth to 6 percent.

“President Pena Nieto has taken the decision to temporarily
suspend public activities related to the Pact for Mexico, to
open a space for frank dialogue that allows disagreements to be
overcome and strengthen the pact,” Pena Nieto’s office said in a
statement.

The opposition conservative National Action Party, known as
PAN, said its leader Gustavo Madero would not attend the
presentation after accusing Pena Nieto’s Institutional
Revolutionary Party, or PRI, of using funds from the Social
Development Ministry to help its chances in local elections in
the state of Veracruz.

The main leftist grouping, the Party of the Democratic
Revolution, or PRD, later supported the PAN in the row,
prompting the president’s office to suspend Tuesday’s
presentation in an attempt to resolve their differences.

Social Development Minister Rosario Robles has come under
fire in the row, and Pena Nieto has backed her to date.

“The response of President Enrique Pena Nieto …
constitutes carte blanche for election miscreants. These hurt
and contradict the contents and aim of the Pact for Mexico,” PRD
Chairman Jesus Zambrano said in a statement late on Monday.

Since Pena Nieto unveiled the plan days after taking office
in December, the Pact for Mexico has constituted the foundation
of his government’s reform efforts, including a shake-up of the
education system and in addition to the telecommunications and
energy industries.

In a radio interview Tuesday morning, Mexican Finance
Minister Luis Videgaray said the financial reform bill should be
introduced “in the next few days.”

(Additional reporting by Miguel Gutierrez and Ana Isabel
Martinez; Editing by Simon Gardner and Theodore d’Afflisio)

The reform bill, which also seeks to curb the power of Mexico’s main broadcaster, Televisa, intends to open up the long closed industry to more foreign competition and give regulators the power to compel dominant companies to sell assets.

Since Mexican President Enrique Pena Nieto unveiled the plan at the start of last week, shares of Slim’s phone giant America Movil (AMXL.MX: Quote, Profile, Research, Stock Buzz) and Televisa (TLVACPO.MX: Quote, Profile, Research, Stock Buzz) have taken a hit.

Pena Nieto’s reform would give regulators the power to force companies with more than 50 percent of a market to dispose of assets. America Movil has about 70 percent of the Mexican mobile business and 80 percent of the fixed line market. Televisa has roughly 60 percent of the broadcasting market.

Pena Nieto hailed the lower house decision, calling it “excellent news” for Mexico on his Twitter account.

“It’s a decisive step for increased coverage, better prices and improved quality in service and content,” he said.

Mexico’s Senate will now discuss the bill, and lawmakers in Pena Nieto’s ruling Institutional Revolutionary Party, or PRI, say they believe it should pass before the current session of Congress concludes at the end of April.

Lawmakers in the lower house made some amendments to the bill, agreeing to tighten the planned opening of Mexico’s TV and broadcasting sector to foreign investment to what other countries permit in their respective markets.

The initial bill allowed foreign investors to take up to 49 percent ownership of TV or radio operators.

The lower house, which voted overwhelmingly in support of the bill, also agreed to change a section granting the president the right to give an opinion on the awarding of concessions. Instead, the minister of communications will do this.

TV BECKONS

On Thursday, America Movil’s shares recovered some ground after investors were encouraged by the possibility Slim, the world’s richest man, could profit by entering Mexico’s TV market, which he has been kept out of, so far.

After the markets closed on Thursday, America Movil said it had obtained the exclusive broadcast rights in Latin America, except Brazil, for the 2014 winter Olympic games as well as the 2016 summer Olympics.

PRI lawmakers say privately that Slim will be allowed into television and that he has been getting ready to challenge Televisa and Mexico’s other main broadcaster, TV Azteca (AZTECACPO.MX: Quote, Profile, Research, Stock Buzz), in the sports broadcasting market.

Slim acquired large stakes in top flight soccer teams Leon and Pachuca last August, and this week, media reports said he was considering buying broadcasting rights for Guadalajara, one of Mexico’s biggest clubs, which has won a record 11 league titles.

Asked if the reports of his interest were true, a spokesman for Slim said: “there’s nothing for the moment.”

Shares of America Movil rose by more than 2 percent in early trading on Friday, while Televisa was barely changed.

Since the reform was presented on March 11, shares in America Movil have fallen by just over 7 percent. Over the same period Televisa’s stock has lost some 6.3 percent of its value and shares of TV Azteca are down about 7.8 percent.

(Editing by Steve Orlofsky and Leslie Gevirtz)

Following more than 14 hours of at times heated debate, lawmakers sent the amended bill to the Mexican Senate for its consideration.

While the proposal has dampened confidence in Slim’s business prospects, investors are hopeful the Mexican tycoon can at least partly offset curbs to his phone empire by entering the television market.

Late Thursday night, lawmakers gave general approval to the bill by a vote of 414 in favor, 50 opposed and 8 abstentions.

Presented by the government on March 11, the reform aims to boost competition in the telecoms sector by increasing foreign investment and giving regulators the power to force companies with a market share above 50 percent to sell assets.

“In our country there is just one territory and it is not the territory or property of any one telephone company,” said Julio Cesar Moreno, a congressman and member of the leftist Party of the Democratic Revolution, or PRD, during the debate.

“Neither can we continue being held hostage to monopolists,” he added.

Slim, the world’s richest man, controls about 70 percent of the Mexican mobile phone market and roughly 80 percent of the fixed-line business through his phone company America Movil.

Shares of America Movil (AMXL.MX: Quote, Profile, Research, Stock Buzz) (AMX.N: Quote, Profile, Research, Stock Buzz) gained 4.3 percent on the Mexican stock exchange on Thursday, hours before the lower house of Congress gave its general approval to the reform.

Televisa (TLVACPO.MX: Quote, Profile, Research, Stock Buzz) has about 60 percent of the broadcast market, and shares of the broadcaster fell 1.5 percent on Thursday prior to the vote.

The reform has been hailed as the biggest planned shake-up in decades of the telecoms industry, which critics of Mexico’s economy view as a microcosm of the excessive control wielded by a small group of people over key sectors.

Lawmakers in President Enrique Pena Nieto’s ruling Institutional Revolutionary Party, or PRI, have said they are confident the historic bill will pass Congress before the current session ends at the end of April.

Though Pena Nieto thrashed out the proposal with the leaders of the main opposition parties, a number of disputed points must still be resolved before the same bill can pass both chambers of Congress.

In the lower house, PRI lawmakers sought to amend the bill to ensure that Mexico follows a reciprocal approach to opening up its market to foreign investment. That approach would ensure that the size of holdings foreign firms can take in Mexico will not be allowed to exceed the share Mexican firms can hold in that country’s market.

As originally set out, the Mexican reform removes restrictions on foreign ownership in telecommunications, eliminating current limits on fixed-line assets.

The bill also envisages allowing foreign investors to take up to 49 percent ownership of TV or radio broadcasters, pending a review by a foreign investment commission. Some major economies do not allow foreign firms such a large holding.

Some opposition lawmakers have also voiced strong opposition to elements of the bill such as a provision that the president be consulted on telecommunications concessions. A separate provision of the bill pledges to create a new independent regulator for the industry.

Shares in America Movil have been hit by the planned reform, falling more than 6 percent since the proposal was introduced at the beginning of last week.

Televisa’s stock has also taken a knock, falling 5.6 percent since the reform proposal was first proposed.

Earlier on Thursday, America Movil said it has obtained the exclusive broadcast rights in Latin America, except Brazil, for the 2014 winter Olympic games as well as the 2016 summer Olympic games.

The announcement boosted some market bets that the company stands to gain more by entrance into the paid TV sector – from which it has been barred by Mexican regulators – than it stands to lose by ceding share of the telephone and internet markets.

(Additional reporting by David Alire Garcia; Editing by Jackie Frank, Lisa Shumaker and W Simon)