Wednesday, November 29, 2023

US Chamber of Commerce warns against changes to Mexico’s electricity market

The U.S. Chamber of Commerce warned Friday that the latest move in Mexico’s quest for energy sovereignty directly contravenes its commitments under the US-Mexico-Canada Agreement.

President López Obrador sent a bill to Congress last Monday that makes major changes to the electricity market that favor the state-owned Federal Electricity Commission (CFE) and deals another blow to the renewable energy industry.

It was the boldest move yet in the government’s efforts to change the rules in the energy sector and give preference to the CFE and the state oil company, Pemex.

U.S. Chamber of Commerce vice president Neil Herrington described the bill as “deeply troubling” and cautioned that it would open the door to reinstating a monopoly in the electricity sector. He also predicted the changes would result in a significant increase in the cost of electricity and limit access to clean energy.

“Unfortunately, this move is the latest in a pattern of troubling decisions taken by the government of Mexico that have undermined the confidence of foreign investors in the country at the precise moment enhanced foreign direct investment in Mexico is needed more than ever. As the country emerges from its worst economic contraction since the Great Depression, nothing will prove more vital to its recovery than the jobs and growth that U.S. and other foreign investors generate.”

Herrington urged Mexico to withdraw the bill from consideration and work with the private sector to find solutions to bolster the energy industry.

The legislation is likely to be approved by the Morena party-controlled Congress but another recent development suggests it might not survive a legal challenge.

The Supreme Court ruled on Wednesday against key elements of a federal energy policy that also seeks to reshape the electricity market in favor of the CFE.

It struck down 22 provisions of the policy on the grounds that they violated the constitution in areas of free competition and sustainability.

The Chamber of Commerce criticism came after Mexico’s leading business lobby launched an unusually strong rebuke of the latest attempt by the government to reverse measures that went into force with the previous government’s sweeping energy reforms.

The Business Coordinating Council described the bill as an “indirect expropriation” that violates international trade agreements. It warned that it would raise energy prices and “irredeemably” damage regulatory and contractual certainty in Latin America’s second largest economy.

The minister of energy responded by denying that any firm would be expropriated and repeated a previous argument that energy reforms had put the CFE in a straitjacket with policies that forced it to buy electricity it didn’t need.

Mexico News Daily

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