Alpek, sole contender for a 49-per cent stake of Mexico's third-largest petrochemical plant, said on Friday that it would abstain from bidding, forcing the government to void the proposed sale. The company is the chemical unit of conglomerate Grupo Alfa.

"In our opinion it does not offer us a sufficient degree of active participation," Alfa spokesman Enrique Flores said.The failure attests to the unpopularity of forcing investors into bed with the state oil monopoly Petroleos Mexicanos (Pemex) in order to finance billions in investment needed to modernise 10 secondary petrochemical plants, experts added.

"The privatisation process has been dead since it was proposed," said Albert Antebi, associate of consulting group Mexico Energy Intelligence, citing the political problems that have shrouded theattempted sale.

Some local newspaper columnists suggested the Energy Ministry allowed the bidding for the plant to fail as a way of justifying an all-out sale, a charge that ministry sources readily denied.

Prospective investors balked at the partial privatisation, saying they did not want to share operational control with Pemex. Local companies said they could not afford the required investment and foreigners clamoured for a greater stake in plants.Since 1992 the government has proposed privatising production of secondary petrochemicals, a derivative of "basic" petrochemicals such as hexane and sulphur, which remain in the hands of Pemex.

But Union and political opposition forced the government to scale back plans and offer a minority stake. Foreigners were limited to a maximum 49 percent holding in the minority interest.

Friday's setback could prompt the government to push again for a total privatisation of the sector. Energy Ministry sources said this week a failed sell-off could prompt a freshproposal for complete privatisation to Congress.

"It's one of the alternatives," a ministry source said.

Initially the ministry proposed to examine a way to allow the private sector greater autonomy and flexibility within the 49/51 percent scheme, the ministry said in a statement.

Foreign chemical producers, turned off by the current scheme, would still jump on a chance to buy up one of Mexico's petrochemical plants if they could hold majority control, some analysts said.

"A lot of people say Mexico has good access to (raw materials) and a large population, so it's a market with lots of growth potential," Purvin & Gertz analyst Ron Gist said.

A full privatisation would have to be approved by an opposition-controlled Congress, which has already begun a fierce debate over President Ernesto Zedillo's proposal to open the state-dominated power sector.