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Mexico opposition wins key state vote, boosting reform outlook

A police officer stands guard at a polling station in San Bartolome Quialana, in the outskirts of Oaxaca, July 7, 2013. REUTERS/Jorge Luis P
A police officer stands guard at a polling station in San Bartolome Quialana, in the outskirts of Oaxaca, July 7, 2013. REUTERS/Jorge Luis P

By Dave Graham and Miguel Gutierrez

MEXICO CITY (Reuters) - Mexican President Enrique Pena Nieto's economic agenda looked to be on surer footing after local elections on Sunday yielded results that favor a cross-party pact he forged to push reforms through Congress.

In the most closely watched race, the conservative National Action Party (PAN) won a tight contest for governor in its stronghold of Baja California, an outcome that should help defuse tensions between the opposition and Pena Nieto's Institutional Revolutionary Party, or PRI.

Baja California was the only governor's office up for grabs as nearly half of Mexico's 31 states voted for a mix of local parliaments and city halls, producing results that allowed both the PRI and the PAN to claim success at the ballot box.

In Baja California, the PAN had accused the PRI of trying to steal the election, so a change of power could have destabilized the "Pact for Mexico" the president made with the opposition to help strengthen his hand in Congress, where he lacks a majority.

But a preliminary vote count on Monday showed the PAN won the race, about 3 percentage points ahead of the centrist PRI.

The PAN's triumph is probably more useful to Pena Nieto than a win for his own party would have been because it should foster consensus-building on the key planks of his legislative program: opening up state oil monopoly Pemex to more private investment and a reform to bolster tax revenues.

News of the PAN victory helped push up the peso more than 1 percent against the dollar in early trading.

PRI chairman Cesar Camacho hinted that his party might challenge the vote count in Baja California. But Pena Nieto later urged all sides to accept the results, underlining the need to keep things friendly in Congress.

"I reiterate that the government is ready to continue the dialogue and deal-making with the political forces to agree the reforms need to consolidate our democracy and speed up Mexico's development and progress," Pena Nieto said in Mexico City.

The electoral process had deteriorated into mud-slinging and mutual recriminations between the PRI and PAN by the time Mexicans cast their votes on Sunday, with each side accusing the other of resorting to dirty tricks to gain advantage.

Violence also blighted the campaign, with several activists from the main parties murdered in a reminder of the government's struggle to curb blood-letting by drug gangs that has claimed more than 70,000 lives since the start of 2007.

PAN BLUES

Outside of Baja California, the PRI did not go empty-handed, notching up some notable victories in mayoral elections.

Jorge Buendia, head of polling firm Buendia & Laredo, said that the Party of the Democratic Revolution (PRD), Mexico's main leftist group and co-signatory of the pact, had fared less well.

However, the PRD, which ran on a joint platform with the PAN in several electoral battlegrounds, including Baja California, said that it too had made important advances in some states.

With 97 percent of the polling booths reporting in Baja California, the PAN gubernatorial ticket had won 47.2 percent of the vote against 44.2 percent for the PRI candidate, preliminary results from the local electoral authority showed.

Since it lost the Mexican presidency last year, the PAN has been bogged down in infighting that has rattled the stability of the political accord Pena Nieto unveiled in December.

PAN chairman Gustavo Madero, whose leadership has been under attack, said the party would still have to evaluate its commitment to the Pact for Mexico after an election campaign he said was marred by attempts by the PRI to steal and buy votes.

But he said the results had vindicated the PAN.

"We are still convinced that Mexico needs reforms," Madero told Mexican radio, referring to the energy and tax plans.

Those ambitious reforms are due to be presented to Congress by early September. Pena Nieto is likely to face strong opposition from the left, especially to the Pemex shake-up.

Tax reform and the Pemex overhaul are vital to Pena Nieto's hopes to raise economic growth to 6 percent a year from an average of barely 2 percent since the millennium began.

Pollster Buendia said setbacks for the left on Sunday were likely to push the PRI closer to the PAN's position on how to approach Pemex reform, implying a stronger push to open up the state oil giant to foreign capital.

The PRD lost control of the local government in the tourist resort of Cancun, where the PRI candidate won by a clear margin.

Buendia said that with no major round of elections due in Mexico until 2015, the pendulum was swinging towards a more business-friendly political platform for economic reform.

"For a couple of years what we're going to see is that there will be fewer approaches between the PAN and the PRD and more between the PRI and the PAN," he said.

(Additional reporting by Luc Cohen and Lizbeth Diaz; Editing by Kieran Murray, Xavier Briand and Cynthia Osterman)

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