OPINION

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By ALEJANDRO ENVILA FISHER

If the cancellation of the construction of New Mexico City International Airport (NAICM) in Texcoco had devastating effects on the Mexican economy — due to the exorbitant cost (estimated by the government’s own Superior Audit offices as being somewhere between 184 billion pesos and 332 billion pesos) but also because of the dubious signal it sent to both national and foreign investors — Mexican President Andrés Manuel López Obrador’s (AMLO) proposed electricity reform, if approved by Congress, could be catastrophic for national development in the medium term.

The average Mexican just wants to improve their daily standard of living. That basically means having a job and a salary to feed their family, being able to send their children to school and functioning in a country with sufficient public and legal security so that they and their assets, of whatever size, do not run disproportionate risks. It also means having the real expectation that if they work and study, their children and grandchildren will have a better life than their parents.

Paying less for goods and services, whether public or private, is a fundamental part of that equation. One of these services is, of course, is electricity.

Any energy reform should be aimed at lowering the cost of energy production that can be passed down as a reduction in the sale price of electricity to consumers. It does not matter if these consumers are individuals or large and small corporations, because all have fundamental rights and play a role in the construction of a developing society.

Carrying out an energy reform to strengthen the Federal Electricity Commission (CFE) by giving it privileged treatment, eliminating free competition and limiting private participation in the electricity generation market is condemning everyone in the country to expensive, polluting electricity which is what is currently generated by the CFE, as opposed to private, cleaner, more efficient alternatives).

Simply put, the parastatal CFE produces electricity at much higher costs than the private sector. Returning the monopoly of production to the CFE via regulations that give it control of the electricity market is putting the interests of a public company that generates millions of dollars in losses and is subsidized with public money, before the interests of Mexican individuals is a violation of the rights of all Mexicans.

More than 30 years ago, energy sovereignty ceased to be the great national objective in Mexico and around the world. The international rules by which energy production and distribution operated changed when economic interdependence (globalization) prevailed over the nationalist and protectionist vision of centrally planned and closed economies that isolated countries from the rest of the world.

The final beneficiaries of lower electricity production costs are the consumer, who pays less for the service; the entrepreneur, who can plan bigger and better investments in Mexico if there is an affordable and dependable electricity supply; the merchant, wholesaler and retailer, who gets a higher profit margin and can better compete in a global market because he is not forced to pass on the high cost of electricity in the final price of his products; and the final consumer again, because by finding better prices, he can buy more with his money. This is clear and evident.

But what is not clear is who would benefit from the so-called energy sovereignty reform that AMLO and CFE Director Manuel Bartlett so adamantly proclaim in their speeches: a state company, the CFE, whose social property is only reflected in the subsidy that every Mexican contributes to maintain its inefficient generation of electricity? the electricity workers union, whose members have as benefits, in addition to juicy early retirement, an exemption from paying their electricity bill? the elite overlords who manage the CFE and, with Bartlett at the helm, that have, in the course of three short years, managed to turn a once-surplus company into a deficit-laden state-owned entity with losses that will only worsen if the reform is approved?

Energy sovereignty, as it is cited today in the speeches of the president and his supporters, is just another of the concepts used to re-awaken a misunderstood nationalism and generate popular support, due to ignorance, for a project that, in fact, would only serve to strengthen and enrich the political elite who oversee the federal budget and public services, by impoverishing the nation’s citizens.

Prior to when AMLO took office in December 2018, the Mexican electricity market worked reasonably well, although it certainly had room for improvement, which it showed when the sector was opened to the private sector for generation, basically clean energy. This private participation stopped the growth of subsidies to the Federal Electricity Commission in recent years, but it also prevented the inability of the CFE to offer sufficient energy production, slowing investment, job creations and economic growth.

That is one of the reasons why the Mexican economy continued to expand — albeit as a dismal 2 percent per annum rate — during the six-ear term of former Mexican President Enrique Peña Nieto. The neoliberal model that AMLO so venomously attacks today, in fact, benefited the CFE, without the need to grant it the deceptive monopoly power that AMLO’s proposal would provide. And it did not favor polluting carbon-based energy sources over clean, renewable alternatives such as solar and wind power. under that platform, the CFE bought cheap energy from private generators and resold it, at a premium, to many final consumers.

The choices are clear: Mexicans can pay less for the electricity they consume and for the products they buy that require electricity in their production process with a market model open to the private sector and regulated by the stat, or it can grant the CFE a monopoly to produce dirty, inefficient energy at a much higher price. An incompetent monopolistic company that generates expensive, environmentally unsound electricity with spiraling economic losses and constantly increasing prices that are passed down to the consumer and subsidized by tax money that could be better used for public health services, education and better security is, to put it bluntly, a financial black hole that Mexico simply cannot afford to maintain.

National energy independence in today’s globalized world is a concept that only serves the ruling political classes, who invoke it to strengthen their power and economic control at the cost of the ever-more-impoverished masses. That applies to Mexico and to any other country that exploits the discourse of nationalism against free trade integration and interdependence. There are many examples in Latin America where this misguided nationalistic rhetoric has been used to exploit the common people, such as in the cases of Cuba, Venezuela and Nicaragua. And in not one of those countries is there a solid, flourishing national economy. Mexico should take note.

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