By KELIN DILLON

Mexico’s private business sector has accused Mexican President Andrés Manuel López Obrador’s (AMLO) proposed reform to the nation’s electric industry of being an “indirect expropriation” of investments made by private companies.

The proposed law would allow Mexico’s state-owned Federal Electricity Commission (CFE) to gain preference over private energy plants to upload their production to the grid, limiting the potential for the expansion of renewable energy plants in the country.

Previous energy reforms back in 2013 allowed those plants that produced energy the most efficiently to upload their power to the grid first, which favored plants with renewable, cleaner energy and was not as favorable to the CFE’s less efficient and less environmentally friendly hydroelectric and thermoelectric plants, which also drew down energy costs for the average Mexican consumer.

Critics of the reform are concerned that it would allow CFE to create a monopoly within Mexico’s energy sector due to the government’s bias against private energy companies.

López Obrador’s initiative, if passed, would also violate international treaties such as the United States-Mexico-Canada Agreement (USMCA), creating discord in Mexico’s international relations, with breaches of trade agreements, environmental protections and foreign investment protections, potentially opening up the door for multinational legal repercussions.  

The United States in Mexico’s largest trade partner, having exported $340 billion dollars to its northern neighbor alone in 2018. Infringing on trade agreements could have consequences for the already-fragile relationship between the two countries, not to mention Mexico’s relations with Canada and the European Union.

The Business Coordinating Council (CCE), joined by the National Chamber of the Transformation Industry (Canacintra) and the Confederation of Industrial Chambers (Concamin), agreed that AMLO’s initiative could bring legal trouble for Mexico, and highlighted further concerns, such as violations of non-retroactivity of the law through its deterrent of investment, and how it infringes upon the right to due process, even going against previous rulings of Mexico’s federal judiciary system.

The CCE urged Mexico’s congressional body to consider the impacts this reform could have on the nation, since it has the potential to vastly increase the prices of goods and services within Mexico, as well as to decrease both foreign and national investment in the country, which, following the economic impact of the coronavirus pandemic, is necessary now more than ever to stimulate Mexico’s economy.

“Forcing people to consume higher-cost electricity is not good for the consumer or for Mexico,” said Concamin. The confederation warned that, if the reform is approved, “the country will be condemned to live in national and international litigation, stopping the much-needed investment that the country requires.”

Concerns have also arisen that the reform would force Mexico to take a step back from the growth of clean energy in the country, as CFE’s plants produce energy much more harmful to the environment compared to their private competitors.

Alicia Bárcena, executive secretary of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), told El Universal that the changes “must be balanced so that efficiency is not lost and renewable energies participate. It is important to walk in balance between conventional and responsible energies.”

López Obrador’s controversial reform is set for discussion in Mexico’s congress within the next 30 days.

…Feb. 4, 2021