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The Fugitive Ex-CEO of Mexico's Oil Company Just Got Arrested in Spain

Cyntia Barrera Diaz and Justin Villamil

(Bloomberg) -- Pemex’s fugitive former chief executive officer was arrested Wednesday, the most high-profile case yet in President Andres Manuel Lopez Obrador’s crackdown on corruption.

Emilio Lozoya, a key figure during Mexico’s opening of the oil sector to private investment half a decade ago, was apprehended in Malaga, Spain. The Latin American nation has asked that he be extradited to face charges related to corruption involving a steelmaker. In a sign the charges could be widened, Mexico’s financial crimes chief told reporters about new investigations related to Lozoya. Pemex’s chief until 2016, Lozoya had been on the run since an arrest warrant was issued last year.

The development is a win for the president known as AMLO, who was elected in a landslide after vowing to crack down on endemic corruption in Mexico. It’s part of a broader shift in attitudes in Latin America, which has historically protected white-collar criminals even as graft ran rampant.

Political pundits, however, cautioned that AMLO’s campaign is often seen as one-sided because it so far has focused on opponents. Lozoya was a longtime confidant of AMLO’s predecessor, Enrique Pena Nieto, who appointed him to the helm of the state oil company.

“This is a case that should be celebrated if and when it leads to a full trial and prosecution,” said Chris Wilson, the deputy director of the Wilson Center’s Mexico Institute, a Washington-based think tank. “But the question I always ask myself when we see arrests or accusations of former officials in Mexico is whether a current government is willing to call out and go after cases of corruption from within.”

Attorney General Alejandro Gertz Manero said in a radio interview that the chase for Lozoya began in Germany before expanding to other countries with the help of Interpol. “This is an investigation that has taken six or seven months across nearly all of Europe,” he said. Lozoya will spend the night in prison, before traveling to Madrid for a hearing, Milenio TV reported.

“Extradition is long, complicated and very costly,” said Lozoya’s lawyer, Javier Coello. “It remains in the hands of the judge.”

Pemex didn’t respond to a request for comment.

A judge in Spain will decide Thursday morning whether Lozoya will remain in custody, a Spanish national court spokesman said.

While extradition proceedings begin, the case risks spilling over into other corners of the country. Mexico is one of the few places in Latin America that wasn’t left reeling from the downfall of Brazil’s Odebrecht SA, the former construction giant.

Mexico’s financial crimes chief, Santiago Nieto, said Wednesday he’s brought several allegations against Lozoya for his dealings with Odebrecht, and that other investigations are ongoing. He mentioned a case involving a shipyard in Spain he said caused losses of 50 million euros ($54 million), without providing more details.

Nieto had frozen Lozoya’s bank account after the hunt for the oil executive began. Nieto was fired from his previous post as an electoral crimes prosecutor in late 2016 for going public about details of another investigation.

Lozoya could shine a spotlight on a culture of corruption at Pemex, which would put pressure on the debt-laden state oil company and the government, said John Padilla, managing director for IPD Latin America.

“He will speak to the entire structure and the way that things have operated at Pemex well before him, and well after him,” said Padilla, speaking over the phone from Bogota, Colombia. “It’s a risk, because the structure of Pemex hasn’t changed, despite what’s being said” by Lopez Obrador.

Last year, Nieto said Lozoya and steel company Altos Hornos de Mexico SA were targets in a corruption probe. Altos Hornos President Alonso Ancira was arrested in Spain in May, although he is out on bail and the company’s board ratified his powers to continue negotiating with interested buyers for the steelmaker.

Lopez Obrador’s government has ramped up probes of past administrations. In August, Rosario Robles, who was minister for social and agrarian development from 2012 to 2018, was detained on corruption charges, the first former cabinet member to go to jail in recent years. Juan Ramon Collado, an attorney with ties to Pena Nieto, was also arrested on money-laundering charges

“This will definitely help AMLO’s popularity,” said Alejandro Schtulmann, who heads Mexico City-based risk consultant Empra. “But if you look at it from an external point of view, Lopez Obrador is only targeting political enemies, and that’s what worries me.”

(Updates with Lozoya hearing in ninth paragraph and new investigations in 11th paragraph.)

--With assistance from Charlie Devereux, Amy Stillman and Eric Martin.

To contact the reporters on this story: Cyntia Barrera Diaz in Mexico City at cbarrerad@bloomberg.net;Justin Villamil in Mexico City at jvillamil18@bloomberg.net

To contact the editors responsible for this story: Juan Pablo Spinetto at jspinetto@bloomberg.net, Jessica Brice, Brendan Walsh

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