Mexican union boss arrest sounds warning to reform foes

The arrest of Mexico's best-known trade union leader on fraud charges has thrown down the gauntlet to powerful interests standing between President Enrique Peña Nieto and his plans to shake up Latin America's second-biggest economy.

For a generation, even presidents shied away from taking on teachers' union boss Elba Esther Gordillo, making her Mexico's most prominent female politician and a formidable enemy to those who accused her of fostering corruption rather than education.

Peña Nieto, who has been in office for less than three months, crossed that line on Tuesday when police arrested Gordillo and three other people with her at Toluca airport near Mexico City.

Mexican television showed Gordillo, 68, wearing a prison uniform and standing behind bars as a state prosecutor formally charged her with embezzling around $200 million from union coffers and using the money to pay for US property, luxury goods, designer clothes, works of art and plastic surgery.

She is not allowed to apply for bail under the charges.

Gordillo, who deferred comment to her lawyers, faces a maximum jail sentence of 30 years, though prisoners can apply to be moved to house arrest at age 70.

"It is clearly a criminal case," Attorney General Jesus Murillo said in a television interview. "The case is very solid."

A former grandee of the ruling Institutional Revolutionary Party, or PRI, Gordillo has denied accusations of corruption.

She was snared a day after Peña Nieto signed a law aimed at improving education standards that she had opposed because it would weaken her union's clout.

Peña Nieto said yesterday that he would work with the teachers' union to improve the education system and promised not to interfere in the investigation of Gordillo.

"This probe must be seen through to the end in strict adherence to the law at all times," he said in a televised address.

The Mexican president is preparing to launch a series of ambitious measures that aim to overhaul taxes, open up state oil giant Pemex to more private capital and ease tycoon Carlos Slim's tight grip on Mexico's telecommunications industry.

"The fundamental point is that resistance by the de facto powers to reform will be confronted with energy and determination," Federico Berrueto, director general of Mexican polling firm GCE, said after Gordillo's arrest.

In Mexico, the "de facto powers" refer to various entrenched interests that include Slim's business empire and dominant broadcaster Televisa, run by Emilio Azcarraga.

Both have repeatedly fought off regulatory efforts to loosen the control they wield over their respective markets.

The government is due to unveil a major telecommunications proposal in the next few days, while separate initiatives on overhauling Pemex and boosting Mexico's weak tax take are expected to go to Congress during the second half of 2013.

The education law signed by Peña Nieto on Monday still faces a fight from Gordillo's union because it requires a secondary law to be implemented.

Changes to the energy sector could face resistance from the Pemex union so Gordillo's arrest was also interpreted as a government warning to other labour bosses that they too might face close scrutiny.