Mexico, López Obrador Appeals Against Energy Ruling

On 30 July Mexico’s President Andrés Manuel López Obrador announced that his government would appeal against a ruling by the supreme court (SCJN) which suspended his administration’s reform of electricity market regulations.
Mexico Obrador Energy Ruling Sener

Analysis:

The energy ministry (Sener) published new regulations in the official gazette on 15 May under the guise of a response to the coronavirus (Covid-19) pandemic. The ‘policy of reliability, security, continuity, and quality in the national electricity system’ ascribed to the state control of electricity transmission and distribution, rolling back the 2013 energy reform to empower the state-owned Comisión Federal de Electricidad (CFE) and Sener; restricting the role of private generators; and curtailing investment in what was a burgeoning renewable energy sub-sector. The policy’s ostensible objective is energy security and independence during the pandemic on the grounds that renewable energy is unreliable.

  • The SCJN granted an injunction to the Comisión Federal de Competencia Económica (Cofece), the federal anti-trust agency, on 29 June against the “effects and consequences” of the controversial new electricity regulations, provisionally suspending them. Cofece had filed a constitutional complaint against the new regulations which it contended “violate the fundamental principles of competition and free market access enshrined in the constitution”.
  • Shortly afterwards, the SCJN also granted an injunction to the state government of Tamaulipas which also took legal action against the regulations, arguing that, with 11 wind farms, the state was at the vanguard of renewable energy production in Mexico, and risked losing more than US$1bn of investment at a time when the federal government should be doing everything within its power to encourage more investment.
  • Speaking during his morning press conference, López Obrador argued that the case of Emilio Lozoya, the former director of the state-owned energy firm Pemex, who was extradited from Spain on 17 July to face bribery charges, demonstrated that corruption and “plunder” were rife and that the 2013 energy reform opening up the national energy sector to foreign investment had been “bought” by means of bribing legislators.

Looking Ahead:

The legal challenge announced by López Obrador looks like the first step in a process of reversing the 2013 energy reform.

In brief: Mexico registers historic GDP drop in Q2

* Mexico’s national statistics institute (Inegi) has released preliminary estimates which show that the country’s GDP contracted by 18.9% in the second quarter of 2020 compared with the same period in 2019, according to seasonally adjusted figures. The report also shows that primary economic activities fell by 0.3%, while secondary activities contracted by 26%, and tertiary activities by 14.5%. Following the news, Inegi’s president, Julio Santaella, tweeted that the drop had been the biggest in the history of this particular macroeconomic indicator, and that it exceeds “in spades” the previous largest contractions reported in the first quarter of 1995 (-8.6%) and the second quarter of 2009 (-7.7%).

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