MEXICO CITY (May 18, 2020) – Mexico’s top business lobbies over the weekend excoriated new rules to govern the electricity sector, arguing they will hit investor confidence and stunt growth in renewable energy, as tensions rise between the private sector and the government.
On Friday May 15th, the energy ministry tightened its control over the power industry, citing the need to ensure the reliability of electricity supply during the coronavirus pandemic.
The row deals another blow to relations between the business community and President Andres Manuel Lopez Obrador, who has alarmed investors with his push to boost state control over energy, often by seeking to revisit existing commitments.
Calling it a “flagrant violation” of the law, the powerful Business Coordinating Council (CCE) on Sunday urged the energy ministry to revoke the order, echoing concerns raised by foreign governments and investors that Mexico is eroding the legal basis of contracts signed under the previous administration.
“The integrity of Mexico’s legal framework must be respected by the government, as must the international instruments and treaties of which we are part,” the CCE said in a statement.
The leftist Lopez Obrador has promised to increase Mexico’s energy independence, and argues that some contracts signed with prior governments were a rip-off for taxpayers.
On Saturday, the energy ministry said industrial and commercial demand for electricity had fallen sharply during the pandemic, and “corrective measures” were necessary.
On Sunday, Energy Minister Rocio Nahle said on Twitter that electricity supply was being safely guaranteed and pointed to progress in renewable power generation in Mexico.
The measures published Friday give the Mexican government more control over the approval of new renewable energy projects. They are likely to be contested.
Employers’ confederation COPARMEX said the step breached Mexico’s obligations under the United States-Mexico-Canada Agreement, a free trade deal which in July will replace the North American Free Trade Agreement (NAFTA).
The new rules “will drive away significant investments in the country, while causing interested parties go to national and international courts to demand that Mexico’s government complies with its obligations,” COPARMEX said in a statement.
The controversy follows a move by CENACE last month to suspend the operation of new renewable plants in Mexico, and has drawn complaints from Canada and the European Union.
Francisco Cervantes, head of industry confederation CONCAMIN, whom Lopez Obrador has publicly referred to as “a great guy”, also condemned the new rules, saying in a statement they “again sent out a contradictory message” just when Mexico should be encouraging investment during the coronavirus crisis.
The Mazatlan Post