Photo: Benita Welter/Pixabay

By KELIN DILLON

Mexican President Andrés Manuel López Obrador (AMLO) introduced a reform to Mexico’s hydrocarbon law on March 26 that would force energy companies to comply with a minimum storage company and give the government power to revoke permits given to private companies, which would controversially expropriate all fuel-related matters from the private sector to the federal government.

The new reform would replace the current lax requirements to acquire a permit of simply being Mexican and having a cellphone, to now requiring five full days of storage.

The proposed reform would retroactively impact permit-holding companies that may not have the proper infrastructure to comply with the new regulations, effectively shutting them out of Mexico’s energy sector.

“Raising the minimum storage policy to the rank of law is good, what I do not think is correct is to give retroactive effect to the law with the permit holders who were there until before the reform. It is legally incorrect,” Sergio Estrada, CEO of Energéticos Nieto, told El Financiero.

“Those who already had permits and who do not meet this minimum are put at risk because it did not exist previously.”

The reform creates the opportunity for the government to expropriate (without verbatim calling it such) foreign companies that already have permits to operate, giving authorization for the government to do so in Article 59 bis of the reform when “an imminent danger to national security, energy security or to the national economy is anticipated.” 

Energy experts also pointed out that the reform would discourage much-needed foreign investment in Mexico, which is now particularly vital following the country’s 2020 covid-fueled economic retraction.

“And therein lies the heart of it all. Not creating an environment of legal security for investments is the central theme of this initiative,” said Estrada. 

AMLO proposed the reform under the guise of protecting national security and investment, though ultimately the reform would give priority to the state-owned fuel company Petróleos Mexicanos (Pemex) to further López Obrador’s quest to reduce Mexico’s private sector and increase the government’s power,

…April 9, 2021

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