Mexico's congress breaks AMLO power reform

(Bloomberg) President Andrés Manuel López Obrador failed Sunday night in his bid to restore state control of Mexico's electricity sector, failing to achieve the two-thirds majority needed in the Lower House of Congress to amend the Constitution.

Lawmakers voted 275 in favor and 223 against the reform bill in a session held on Easter Sunday, after the opposition united against the proposal. The result gives some comfort to a private renewable energy sector that has been attacked with rule changes that hinder investment since López Obrador took office at the end of 2018.

AMLO, as the president is known, had tried to use the bill to consolidate his nationalist vision of the energy sector and reverse a privatization of the electricity industry that began more than two decades ago.

The reform would have given the state-owned Federal Electricity Commission, or CFE, at least 54% of the market, limiting private participation and incorporating independent energy industry regulators into the federal government. If the electricity reform failed, the president promised to send Congress on Monday a new bill guaranteeing state control of lithium.

Critics, including industry representatives, said the legislation covered fossil fuels and would paralyze the country's energy future by blocking private investment. U.S. officials, including climate envoy John Kerry, and Ambassador Ken Salazar had also warned that the bill would violate the free trade agreement with Mexico and put more than $10 billion in US investment at risk.

López Obrador has made energy a central element of his presidency, with attempts to reform the CFE and state-owned Pemex, which has seen production decline and become the most indebted oil company in the world. He has used his daily press conferences to question the patriotism of opposition lawmakers for siding with foreign companies.

Private investment in energy projects has fallen to a minimum due to López Obrador's efforts to change the Constitution. The failure of the bill could mark a turning point that could lead to increased investment in the coming years, said Severo López Mestre, an energy consultant and former industry official who implemented the first reforms to open up the electricity sector to private investment two decades ago.

If López Obrador cannot change the Constitution, no one can, said López Mestre in an interview, adding that the level of uncertainty will now fall. “Mexico will require investment since everything has fallen behind.”

Even so, the government of López Obrador could continue to hinder investments. It has refused to renew the contracts of foreign companies such as Iberdrola, plunging companies and the State into judicial battles. Last week, the Supreme Court confirmed another law, albeit with weakened key parts, that authorizes the CFE to send the electricity it generates to the grid before cheaper private alternatives.

David Enriquez, a partner at Goodrich Riquelme y Asociados law firm, said that legal remedies brought by private companies against the law will continue to be fought in court.

“Resources are still in limbo,” he said. “Some collegiate courts may decide in favor of companies, others against, and that creates a dispersion of decisions.”

Original Note:

Mexico's Congress Throws Out Amlo's Nationalist Power Bill (1)

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