Divisive Mexico labor reform signals battles ahead for Pena Nieto

But plenty more skirmishes await as the youthful Pena Nieto, 46, faces a showdown with traditionalists in his Institutional Revolutionary Party (PRI), commonly dubbed “dinosaurs.”

On Saturday, the lower house of Congress gave its approval to the biggest overhaul of Mexico's job market in over 40 years, a bill designed to re strict labor lawsuits, regulate outsourcing and make it easier for employers to hire and fire workers.

The reform was proposed by outgoing President Felipe Calderon, though Pena Nieto's support helped it along and he will be a major beneficiary when he takes power on Dec. 1.

By the time it was approved, however, PRI legislators had stripped it of elements hostile to trade unions, a bastion of PRI support derided by many Mexicans as corrupt.

The labor proposal, which must still pass the Senate, would check off one of Pena Nieto's three main economic campaign pledges.

PRI officials are confident the bill will become law. But the bumpy ride it had in the lower house was a sample of the challenges Pena Nieto faces persuading his party to accept reforms that go against its natural instincts.

“Beyond the stuff that's said about people wanting to change or not wanting to change, I'll tell you this: I'm not going to change,” said Patricio Flores, a PRI union leader in the lower house, defending amendments to the labor reform. “Because I think things are where society wants them to be at the moment.”

Pena Nieto also plans to open up state oil monopoly Pemex to more private investment and find ways of increasing Mexico's paltry tax take. He hopes the changes will boost economic growth and create a platform for the PRI to keep the presidency when his six-year term tends.

However, the reforms will sit uneasily with those in the PRI who see themselves as defenders of the corporatist model that formed the basis for its long rule between 1929 and 2000.

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