Why Is AMLO Trying to Roll Back Mexico’s Energy Reforms?

Greg Ahlgren, partner at Diaz, Reus: “Andrés Manuel López Obrador’s policy proposals seek to energize support for his party prior to the midterm elections in June. Consistent with his nationalist approach to economic matters, AMLO is promoting energy independence as a national objective. Not surprisingly from a government that frequently reminds world leaders of Mexico’s sovereignty, AMLO has made a point to consolidate a variety of functions under state-controlled institutions, and his current proposals in the energy sector exemplify this. By favoring the CFE, he will also greatly benefit Pemex (and its huge and unionized work force), which supplies fuel oil for electric generation plants. While other hydrocarbon-rich nations are looking to a future beyond fossil fuels, it seems that Mexico is now seeking to return the country to an energy model that prospered 50 years ago, without seeking creative private-sector solutions to the looming environmental and energy-grid crises. The air contamination in major Mexican cities cannot be prudently ignored, and the random power blackouts must also be addressed on a priority basis. My overarching concern is that AMLO’s short-term objectives of consolidating power within the national government may bring unwanted consequences that will be difficult to remediate. First, competition will be hurt, damaging the foreign investment climate in general and possibly exposing the country to significant unfavorable arbitral awards. Second, by favoring CFE in its present configuration, the country is only deepening its fossil fuel dependence, and procrastinating on the task of reducing carbon emissions.” 

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