Analyst: Pemex, Union Negotiation Shows Govt Biding Time

This month's renegotiation of the collective contract agreement (CCT) between Mexico's state oil company Pemex and the oil workers union (STPRM) demonstrates the government and Pemex's leadership are not yet ready to confront the union, which itself realizes "time is limited," Eurasia Group analyst Pamela Starr told BNamericas.

The agreement was closed in six weeks, 15 days before the previously established deadline, and establishes a salary increase of 4.25% and a 1.6% rise in benefits.

Pemex thus avoided the formal threat of a strike for the first time since 1991.

However, it was in the union's interest to give the government something and it did grant one important concession, Starr said. Pemex will now be able to relocate some 16,000 workers within the company's five subsidiaries rather than have to hire new workers to relieve shortages in certain areas while underused employees in others enjoy leaves of absence.

"It was the only union concession but it's classic [President Felipe] Calderon, who is do things bit by bit, get what you can now. In the 2009 mid-term elections, PAN [Calderon's political party] will hopefully win a landslide in the lower house, or at least a majority, and he will then have a mandate. Then you go back and do the hard stuff."

The first issue after elections will be another renegotiation of the Pemex collective agreement, Starr said, adding that the PAN would go after the union harder if it wins.

"If they have a majority, it won't matter if they make the union mad. If you make the union mad [now], you'll make [rival political party] PRI mad and then it will be harder to negotiate with PRI in the legislature. They don't have the flexibility to go after the union because they need the PRI [currently, to pass legislation]," she said.

"If they can get a majority in the lower house, they still have to deal with the PRI in the senate, but they'll have much more flexibility," she added.

The two-year collective contract agreement takes effect on August 1.

Of the budgetary impact the salary increase will have through end-2007, 90% will be covered by savings made by Pemex from January-June 2007, BNamericas reported previously.

Eurasia Group is a global political risk advisory and consulting firm.

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