ANALYSIS-Mexico's U.S. power offer more about politics MEXICO CITY, (Reuters) - Mexico"s offer to supply a small amount of electricity to California"s buckling grid is more about politics than power and will hardly dent the U.S. state"s energy woes. While the offer could provide some relief to a handful of energy-starved Californians, the overture will provide the 2-month-old government of Mexico"s President Vicente Fox new political leverage in his effort to quell drug and immigration tensions with the United States.

Mexico"s state-run Federal Electricity Commission, the supplier of 98 percent of the nation"s electricity, said on Thursday night it was in talks to supply about 150 megawatts to the United States to help with a power deficit. For a state in which millions have suffered controlled, or "rolling," blackouts, a Mexican connection would bring only measured relief -- enough power to supply about 150,000 homes. But across the 2,100 mile ) border, the gesture forms part of a public relations blitz aimed at fortifying ties with the United States, and could inch Mexico closer to quieting clamors over the drugs and immigrants pouring across its U.S. frontier, political and energy analysts said. "Drugs and immigration remain the big issues," said Federico Estevez, political scientist at Mexico"s ITAM University. "In the short term it (the goal) was obviously to derail the decertification process."

Each year Mexico and a string of other nations home to illegal drug activity come up for U.S. approval that they are pulling their weight in the war on narcotics. Countries that do not pass U.S. muster can be "decertified," or blacklisted, and be slapped with economic sanctions. Mexico bitterly complains that the process is demeaning and the Fox government has said it hopes to replace certification with a multilateral arrangement. Fox, a 58-year-old rancher and former Coca-Cola Co. executive, said he would eventually like to see the border opened to unfettered immigration. The issue has been increasing in the spotlight as more and more Mexicans, most fleeing poverty at home, die from drowning, dehydration or exposure in ill-fated U.S. border crossings.

MEXICO FACING OWN POWER ISSUES

Mexico"s electricity offer came one week after U.S. President George W. Bush said the strengthened energy ties with Latin America"s second-biggest economy could have an impact on easing the U.S. energy official. But Mexican officials have been quick to note that the nation does not have the generating capacity or interconnections to provide California with much relief. "We can do a little, but there is not the physical infrastructure to do more," said CFE Director Alfredo Elias in a radio interview last week. In fact, analysts say Mexico faces its own bout of power problems. To meet its own breakneck electricity demand growth, the nation needs a whopping $50 billion to upgrade and expand its grid over the next decade, say officials and analysts. And Mexico"s own grid is showing signs of strain. Energy officials have admitted that Mexico cut power to large industrial clients 41 times last year to avoid a broader blackout, and the grid was operating at close to its lowest spare electricity reserve levels ever. Mexico has tried to keep pace with the dynamic energy needs by allowing outside investment in its state-run sector, which was nationalized in 1960. But unclear rules have limited private investment, which many analysts say is the only way to meet the massive infrastructure program"s price tag. After ex-President Ernesto Zedillo"s electricity reform floundered in Congress, the onus is now on Fox. And experts say he must get legislation moving by this year in order to have new capacity ready for operation by 2003 -- when electricity is set to run out. "It is conceivable that there will be blackouts in the next few years if investment isn"t made in generation and transmission infrastructure," said Andrew Hill, Latin American energy analyst at Wood Mackenzie in London. In the meantime, Mexico"s power stream to the U.S. may serve for political mileage in the steady struggle to forge trade and diplomatic ties . "It"s the same story as nine years ago," when the North American Free Trade Agreement (NAFTA) was being drafted, said Estevez. "The difference with the Fox team is that they want to change the mix on the agenda." ^

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-- Martin Thompson (mthom1927@aol.com), January 26, 2001