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Over 196.7 billion pesos in investment into Mexico’s energy sector are now in jeopardy, following Mexican President Andrés Manuel López Obrador’s (AMLO) controversial proposals to reform the nation’s electric industry, according to opponents of the bill.

The proposed law would allow Mexico’s government-owned Federal Electricity Commission (CFE) to gain priority over private energy plants to upload their production to the national grid, limiting the potential for the expansion of renewable energy plants in the country, as well as discouraging foreign investment.

National and international companies that could have the return on their investment affected by the proposed law could take Mexico’s government to court to demand compensation due to breach of contract, according to a budgetary impact analysis by the Center for Studies of Public Finance (CEFP) of the Chamber of Deputies.

According to the analysis document, there are currently 57 energy projects in operation under 14 contracts, all of which would be affected by the proposal. 

“These projects involve at least 28 companies from different countries,” said the CEFP’s analysis. “If the initiative is approved, they would be in a position to file constitutional disputes or demand compensation, as agreed to in the contracts and if they are under the protection of international treaties.”

Contracts for renewable energy projects in Mexico were auctioned out between 2015 and 2017, with validity for up to 20 years, with a total capacity of 9,525 megawatts.

The analysis mentioned that the proposed electricity reform could cause problems with Mexico’s international relationships, since the reform may violate “various commitments in terms of investment, cross-border trade in services and state companies, which include three free trade agreements: the United States-Mexico-Canada Agreement (USMCA); the Trans-Pacific Partnership Agreement (CPTPP) with 10 other nations of the Pacific Basin (Asia and America); and the Free Trade Agreement with the European Union (TLCUE).”

Mexico’s Business Coordinating Council (CCE) also noted a further 451.2 billion pesos of investment in solar and wind energy could be at risk if AMLO’s proposal is passed. 

Further criticism of the initiative’s potential ramifications came from Mexico’s International Chamber of Commerce, which said the proposal would, “in addition to affecting the entire clean energy-producing industry, also profoundly and in the long term damage our country’s reputation in the eyes of domestic and foreign private investors.”

An open parliament to debate the proposal will be held by Mexico’s congress on Friday, Feb. 12, in which experts and those affected by the potential reform will be given the opportunity to share their thoughts on and criticisms of the initiative.

…Feb. 12, 2021