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Energy Reform: Rebuilding Public Sector Assets

Oct 2, 2021
AMLO Reforma Litio

Energy reform: rebuilding public sector assets

(The two most important planks of the Fourth Transformation, President Andrés Manuel Lopez Obrador’s project to radically transform Mexican society in the interests of the majority, is the fight against corruption and the struggle to reverse the neoliberal reforms that, as well as being linked to corruption, massively benefitted the private sector and foreign investors while negatively affecting the country’s well-being and future.

This was very clearly revealed in the energy sector, specifically electricity and oil. Despite promises that the neoliberal measures would modernize these industries and keep prices down, the opposite was the case. The new bill sent by AMLO to Congress seeks to reverse these unpopular policies.)  

La Jornada editorial, Saturday, October 1, 2021

Secretario de Gobernación en Conferencia

President Andrés Manuel López Obrador announced that on Thursday he sent a bill to Congress to reform Articles 25, 27 and 28 of the Constitution dealing with energy policies. The aim is to recover the State’s guiding role in the electric power industry and codify that only State-owned companies will be able to mine the lithium found in the country’s subsoil.

The President’s proposal implies canceling the electricity generation permits granted to and the electricity purchase and sale contracts made with the private sector. It is based on the consideration that the regulatory framework created in 2013 resulted in the dismantling of an integral electric power industry and weakened the National Electric System along with energy and national security, since its real objectives were taking control of this recourse, eliminating the State’s energy companies, and granting unlimited benefits to the private sector.

One of the key aspects of the proposal to reverse Peña Nieto’s counter-reform is allocating the power to determine when and how much energy to purchase from private generators to the Federal Electricity Commission (CFE), in addition to establishing that in each case, the private sector companies must present offers and the CFE will choose the one that best suits national interests. It should be recalled that, under the current scheme, the CFE is obliged to buy electricity production of private companies, even when it has the capacity to satisfy the demand with its own means. This results in a double disadvantage of buying something that the company can generate by itself while its plants remain idle.

Another absurdity created by the neoliberal legislation, which the President’s bill would put an end to, is the provision that removed from the CFE the elementary power to establish the rates at which it buys and sells electricity. The new bill would also put an end to the artificial weakening of the CFE by ending its fragmentation into subsidiaries and affiliates, as well as eliminating agencies designed to facilitate privatization, such as the Energy Regulatory Commission (CRE) and reincorporating the National Energy Control Center (Cenace) back into the CFE.

It was also announced that no new concessions will be granted for mining lithium, which is strategic for its applications in producing batteries for devices ranging from smart phones to automobiles. The eight concessions already granted will be reviewed and will be respected on the condition that they demonstrate to the CFE and the Ministry of Energy that they have started exploration and that they are on schedule to start production, in order to prevent a national asset from being used for purely speculative purposes.

The federal government’s new attempt to dismantle what it has denounced as a wholesale robbery of the country generated the expected reactions among legislators, experts, commentators, and business associations, the latter in obvious defense of their own interests in the matter. It is clear that the presentation of the bill marks just the beginning of a long and complex debate, as well as of a no less arduous construction of political agreements among the different forces represented in Congress. With this in mind, it’s worth calling for the presidential proposal to be discussed seriously, calmly, and with a view to obtaining the best results for Mexico.



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