Mexican President Wants To Dissolve Energy Regulators

(Argus, 8.Jan.2021) — Mexican President Andres Manuel Lopez Obrador plans to dissolve Mexico’s independent energy, telecommunications and competition regulators, incorporating them into government ministries.

“These organizations have only served as smoke screens for illicit activity and hiding information … they cost a lot, do not work and do not benefit the nation,” Lopez Obrador said today.

The president, a long-term critic of autonomous regulators, said yesterday that he will send a proposal to congress seeking to absorb the regulators into government ministries following a review of each body next week.

Dissolution of the regulators would save the government Ps20bn ($1bn), he said.

Industry bodies have condemned the proposals, claiming they will further dent already bruised investor confidence following three years of anti private-sector rhetoric.

“Projects to weaken or eliminate autonomous regulators that have been pillars of democracy generate uncertainty,” business council CCE said yesterday. “The concentration of power, the elimination of controls and specialized technical knowledge will never contribute to positive results in any of the affected sectors.”

Lopez Obrador did not provide a list of all regulators that would be affected but singled out the Federal Telecommunications Institute (IFT), the national transparency institute (INAI), and regulators that had “allowed privatizations,” and “made the energy ministry and Pemex redundant.”

Mexico’s energy regulatory commission (CRE) and oil regulator (CNH) are tasked with ensuring an even playing field between all market participants, including state-owned Pemex and CFE, as well as monitoring compliance with the upstream auction contracts awarded following the 2014 energy reform that dismantled the state monopoly in the energy sector.

But Lopez Obrador has repeatedly slashed the regulators’ budgets over the past three years, stocked them with commissioners loyal to the president but without the requisite technical experience and called on them to favor CFE and Pemex where possible.

In June, the president’s party floated the idea of combining the federal competition commission (Cofece) and the CRE, but the plans were shelved following a widespread pushback from industry.

But Lopez Obrador has pledged to move ahead with a counter energy reform this year if his policy to restore CFE and Pemex dominance was not possible within the existing legal framework. The dissolution of autonomous regulators would likely sit within this broader policy shift.

Changing the constitutionally-enshrined energy reform would require a two-thirds majority in both the lower and upper houses as well as a simple majority in state legislatures. Amendments to general laws require only a simple majority in the federal legislature.

Morena now holds slightly less than a two-thirds majority in both houses, but has allied parties. Midterm elections this summer could change that balance.

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By Rebecca Conan