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Moody’s Analytics, one of the three top credit rating agencies in the world, said Wednesday, Oct. 6, that Mexican President Andrés Manuel López Obrador’s (AMLO) controversial electricity reform initiative would have negative implications for the country’s credit rating.

“The initiative would be negative for the Mexican power sector because it would decrease its operational transparency, discourage private investment in generation, discourage renewable generation and probably increase the overall cost of electricity,” Moody’s Investors Service said in a statement.

The ratings agency also warned that the initiative, which is intended to concentrate all electricity production, management and distribution in the hands of the state-run Federal Electricity Commission (CFE), would most likely trigger international legal disputes, discourage foreign investment competitiveness and prevent Mexico from reaching its climate goals.

Moody’s called the bill “credit negative for the Mexican electricity sector because it would lessen its operating transparency, deter private investment in generation, disincentivize renewable generation and likely increase the overall cost of electricity.”

Mexico’s current sovereign credit rating is Baa1, with a negative outlook, which means that it is essentially considered “junk,” or noninvestment grade and extremely speculative, with substantial risks for investors.

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