Yahoo Finance Sheinbaum Win Gives AMLO One More Shot to Boost State Utilities
(Bloomberg) -- President-elect Claudia Sheinbaum’s sweep of Mexico’s election is breathing new life into outgoing President Andres Manuel Lopez Obrador’s bid to exert more political control over the country’s energy sector.
Most Read from Bloomberg
Wells Fargo Fires Over a Dozen for ‘Simulation of Keyboard Activity’
Southwest Plane Plunged Within 400 Feet of Ocean Near Hawaii
Bump Stock Ban Tossed Out by Supreme Court in Gun-Rights Win
Tesla Investors Get Behind Musk’s Fight for $56 Billion Pay Deal
Apple to ‘Pay’ OpenAI for ChatGPT Through Distribution, Not Cash
AMLO, as the current leader is known, has proposed dismantling Mexico’s independent energy regulatory agencies as part of a raft of constitutional amendments that would overhaul the judiciary, the electoral system, the retirement system and more.
Earlier this year, Mexico’s Supreme Court struck down AMLO’s attempt to strengthen the government’s role in the power sector as unconstitutional. But when the nation’s new legislature takes over Sept. 1, AMLO and Sheinbaum’s party will have a near-supermajority, likely giving him enough seats to overrule the court.
Although energy isn’t going to be among the first topics discussed in September, Sheinbaum has largely supported AMLO’s reforms. Critics say the plans are a last-ditch attempt to continue rolling back a set of 2013 laws that opened Mexico’s energy market to private investment. Undoing those measures would help shore up state control of the sector and strengthen state-owned companies Comision Federal de Electricidad, or CFE, and oil producer Petroleos Mexicanos before he hands over the presidency on Oct. 1.
“If there’s a dramatic change, those regulators won’t have power to be neutral in their decision making, in data transparency, or in what permits are granted,” said Norberto Catalan, a natural gas trader. “If they disappear, the risk is that everything will be in favor of state-owned Pemex and CFE.”
The proposed reforms would dismantle committees like Mexico’s Energy Regulatory Commission, known as CRE, hydrocarbon regulator CNH, as well as the antitrust regulator and the telecommunications regulator — independent offices that AMLO has called “superfluous” and “onerous entities that serve no purpose.”
Instead, oversight for matters like permit applications and approvals would be handled by Mexico’s energy ministry — led by a Sheinbaum appointee — stoking fears that most private companies operating in Mexico will be required to partner with Pemex and CFE.
“The reform, if approved, could impact foreign investment and companies’ operations because it will modify the established permitting process,” said Jorge Aguilar, senior policy adviser for Holland & Knight in Mexico City. “Companies should monitor legislative changes to adapt to the regulation and identify who will be in charge of reviewing those permits. If not, they could encounter legal uncertainties, which may cause companies to leave the country.”
Spokespeople for Mexico’s energy ministry and Sheinbaum didn’t immediately respond to requests for comment.
Mexico’s markets have been melting down after Sheinbaum said the reforms, particularly a controversial plan for the judiciary, would be discussed in Congress, spooking investors who worry they’ll erode checks on the ruling party. Officials from Sheinbaum’s Morena party, which has a two-thirds majority in the lower house and nearly the same in the Senate, have said they could start discussing constitutional reforms in August and present them to legislators in early September.
Foreign direct investment in Mexico’s energy sector has withered under AMLO, averaging about $2.8 billion per year during his term, half of its peak in 2017 before he took office, according to Banco Bilbao Vizcaya Argentaria. Instead, AMLO favored propping up Pemex with capital injections and tax breaks, which have largely failed to boost flagging production and reduce the company’s $100 billion debt burden.
Sheinbaum has said she would continue AMLO’s policy of state support for Pemex and CFE. The climate scientist and former Mexico City mayor, whose ambitions include speeding up Mexico’s shift to more renewable energy, has also said private investment has a role in Mexico’s energy transition and has pointed to public-private partnerships and co-financing mechanisms as ways to attract private capital.
“The path forward will depend on whether she continues the policies of the previous administration or adopts a more pragmatic approach to addressing the challenges facing Pemex and the broader energy industry,” Welligence energy analyst Pablo Medina wrote in a note. Sheinbaum’s near-supermajority in the legislature will allow “her to change the constitution, potentially hindering the previous regulatory framework.”
Most Read from Bloomberg Businessweek
Grieving Families Blame Panera’s Charged Lemonade for Leaving a Deadly Legacy
Israeli Scientists Are Shunned by Universities Over the Gaza War
The World’s Most Online Male Gymnast Prepares for the Paris Olympics
©2024 Bloomberg L.P.
