Mexico’s Lopez Wants Plan To Execute Energy Vision

(Reuters, 11.Aug.2020) — Mexico’s president has given officials until late September to craft a plan to reassert state control over the energy industry as an alternative to constitutional change to achieve the same goals, according to three people familiar with the matter.

President Andres Manuel Lopez Obrador on July 22 set out his plan for bolstering national oil firm Petroleos Mexicanos, known as Pemex, and state power utility the Comision Federal de Electricidad (CFE) in a memorandum presented at his offices.

According to the sources, Lopez Obrador read out the memorandum to some two dozen regulators and officials and gave them until Sept. 22, the date of a planned follow-up meeting, to report back on how to make its 17 points a reality.

Published by Mexican media and seen by Reuters, the memorandum distilled how Lopez Obrador intends to roll back the business-friendly 2013-14 liberalization of the energy market pushed through by his predecessor, Enrique Pena Nieto. Under the liberalization, oil majors including Royal Dutch Shell PLC, ENI SpA, BP Plc and Total Plc won rights to drill Mexican fields previously reserved for the state.

Pena Nieto had said that over 800,000 jobs and $200 billion worth of investment ultimately depended on the success of his energy reform.

Industry group Amexhi says $11 billion has been invested so far, while the government oil industry regulator put the figure at around $5 billion. Amexhi says in total, approved investments will reach $37 billion in the next few years.

Lopez Obrador argues that previous governments in thrall to corrupt practices and moneyed interests skewed the market in favor of private companies at the expense of the public.

Lopez Obrador previously pledged not to change Pena Nieto’s energy reform during his first three years. However, his government has suspended tender auctions of oil and gas fields and tried to prevent new privately-run power stations from coming online.

A week after the meeting, which the government has not mentioned publicly, Lopez Obrador told a regular news conference that Mexico could consider changing the constitution to give more power to the state over energy policy if necessary.

Still, such a move was unlikely and would not take place before the second half of his 2018-24 term, the president said. At the July 22 meeting, he also mentioned constitutional change as a potential last resort, the sources said.

The president’s office did not respond to a request for comment.

Lopez Obrador, who took office in December 2018, is still well over a year away from the mid-point of his term.

Although the president said during the meeting he did not aim to pitch a reform as soon as the next period of Congress beginning September, he mentioned he could do it after the June 2021 mid-term congressional elections, one of the sources noted.

“The president said from the third year of his administration he would be in a position to send an initiative. He spelled that out clearly, and that what he wanted to see is whether the reform was necessary,” the source said.

Another of the sources said a bill was not imminent, and it would take time to prepare the necessary legislation.

However, the memorandum showed Lopez Obrador was increasingly grasping that Pena Nieto’s reform was more far-reaching in scope than the government had anticipated, with rules that were “designed to favor the private sector,” one of the sources said.

Constitutional changes require two-thirds majorities in Congress; the June 2021 elections could weaken the president’s hold over the lower house.

Lopez Obrador’s moves against the private sector have already angered business leaders and helped bring about a significant decrease in fixed capital investment.

Enoch Castellanos, president of industry association Canacintra, said the energy plan would further unsettle investors at a time the economy needed all the private investment it could get.

“It’s terrible news,” he said.

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Reporting by Adriana Barrera and Dave Graham; Editing by Leslie Adler