MercoPress. South Atlantic News Agency

Mexican government fights waste, inefficiency and takes over energy plant

Surprise move from President Felipe Calderón

Mexico has closed a state-run energy distribution firm with about 40,000 employees and 25 million customers, blaming the scale of its losses. Federal police seized the offices of Luz y Fuerza del Centro on Saturday night when the city was celebrating Mexico’s qualifier to the South Africa World Cup.

Spending at the company was increasingly outpacing sales, according to the government. The firm faced an “unsustainable financial situation”, President Felipe Calderon said. Mexico is trying to cut public spending to offset falling oil revenues.

The Federal Electricity Commission, a state-run utility that provides electricity across the rest of the country, is to provide services to Luz y Fuerza's customers.

The firm's costs between 2003 and 2008 were 433 billion pesos (32.5 billion US dollars) while its sales 236 billion pesos, the government said.

Mr Calderon said the utility company could not continue to be funded without increasing electricity rates or taxes.

“That would be unfair particularly when our country is going through tough economic times,” he said. However, he denied union claims that the government was going to privatise the company.

The government said Luz y Fuerza lost 32.5% of the energy that it generated or bought to distribute to its customers. It added that about half of the firm's staff costs went toward pensions for 20,000 retired workers.

A crowd of about 10,000 people gathered in Mexico City to protest about the government's intervention.

However the Mexican Electrical Workers Union, SME, protested the measure and demanded the immediate rejection of the decree otherwise “the struggle will be to the end” said Martin Esparza, head of the association

The Mexican government does not recognize Mr. Esparza arguing he was elected head of the union involving anomalies, amid claims from opposing groups of workers.

SME has been promised support from mining, communications unions, peasant organizations and the Mexican Autonomous University.

Esparza has rejected the “juggled numbers” of President Calderón and blames a media campaign for the bad PR of the company.

“It's a difficult decision, but (it's) indispensable for the sustainability of Mexico in the future” Finance Minister Agustin Carstens said of the shutdown on national television Monday.