January 20, 2002

Report: Mexico probes Pemex, PRI for corruption

                 MEXICO CITY, Mexico (Reuters) -- Mexico is probing its state oil monopoly
                 for allegedly channeling $120 million to the 2000 election campaign of the
                 long-ruling PRI party, a sign President Vicente Fox may be toughening his
                 stance on corruption, according to a media report Sunday.

                 Mexico's Comptroller General and the Attorney General are investigating funds sent
                 by oil giant Petroleos Mexicanos (Pemex) to its powerful union, which in turn may
                 have sent the money to Institutional Revolutionary Party's (PRI) losing presidential
                 candidate, the Reforma newspaper reported.

                 The PRI candidate, Francisco Labastida, lost to Fox in the July 2000 presidential
                 election, ending 71 years of one-party rule.

                 Comptroller General Francisco Barrio told reporters late Saturday that a probe had
                 turned up evidence of 1.1 billion pesos ($120 million) sent by the oil giant to the
                 union, but he could not confirm if the cash was linked to Labastida.

                 "In Pemex there is an issue that effectively has to do with transfers from the
                 company to the union," Barrio said. "We have filed a report about two transfers of
                 1.1 billion pesos, there are other transfers in which we have not yet filed a report."

                 Reforma reported that it is suspected that the transfers to the union -- money that
                 never arrived in the union's bank accounts -- were sent to the Labastida campaign.

                 The probe could implicate Rogelio Montemayor, a PRI politician who headed
                 Pemex for most of 2000, Pemex union leader Carlos Romero Deschamps and other
                 Pemex finance officials, Reforma said.

                 Government signal

                 The investigation appears to signal Fox's government is finally taking action in its
                 avowed campaign to prosecute graft at all levels of government.

                 The PRI is widely viewed as having engaged in vast corruption and embezzlement
                 of funds during its seven-decade rule, but since Fox took office in December 2000,
                 he has been seen as soft on corruption.

                 Analysts said that Fox's government may have laid low on the corruption front last
                 year to avoid jeopardizing the passage of a key tax reform, aimed at bolstering the
                 government's paltry tax take.

                 But because Congress passed the tax package earlier this month, Fox now has
                 more room politically to chase past ills.

                 "It has not been clear to what point Fox was willing to go to open the closets of the
                 past and bring the skeletons to light," said Lorenzo Meyer, a historian at the Colegio
                 de Mexico. "But the reform has passed, so Fox may be more free to pursue thi s."

                 The politically explosive investigation also comes just weeks away from the election
                 for a new leader of the PRI, which has drifted since the 2000 election loss.

                 Two of the PRI's most powerful figures, Chamber of Deputies President Beatrix
                 Paredes and former Tabasco state Gov. Roberto Madrazo, are vying for the party's

                 Neither the Comptroller General's office nor the Attorney General's office was
                 available for comment.

                  Copyright 2002 Reuters.