Retrograde electricity reform upsetting the neighbors

We have commented before in this space about President López Obrador’s relentless campaign to dismantle the previous administration’s energy sector reform that cleared the way for participation by private companies.  For us, the historic reform was akin to throwing open the door to an attic that had been locked for years with a dead body inside (Pemex, in this case) to finally let in fresh air.  Most of the ham-fisted maneuvers by the president and his enablers in the Mexican Congress have been at least temporarily blocked by legal challenges, including at the Supreme Court level.  Undeterred, Mr. López Obrador (AMLO) launched his latest and most ambitious salvo this past week, ramming through the Chamber of Deputies via fast-track a reform of the current electricity law granting advantages to the state-owned former monopoly Federal Electricity Commission (CFE) at the expense of privately financed electricity generation plants.

The president’s administration and political party Morena (commonly referred to together as the 4T) have tried to provide cover for the drive to return to state energy monopolies on the grounds that renewables — much of the private-sector generation the 4T seeks to sideline is wind and solar — are undependable, but energy specialists have easily disqualified those arguments in the case at hand.  In reality, the underlying justifications for the obsession with returning to state-run monopolies are expressed in the placards and painted bed sheets that the Morena Federal Deputies recently paraded around the Chamber in a hyperbolic demonstration of devotion to their Dear Leader’s great ideas: “Energy for the people,” “Give Everything Back to the People” and “The People Pay Us, Not Iberdrola,” etc. etc.  This is what we call in Mexico “atole con el dedo,” or loosely translated, a bunch of bullcrap that sounds good but means nothing.  The cynicism is even more breathtaking, really, because if this bad public policy is actually implemented, “the people” will be getting “screwed.”  We will be paying a higher cost for electricity produced by less efficient generation plants that are far more polluting, powered as many of them are by coal and President López Obrador’s beloved fuel oil.

Fortunately, we are fairly confident that court-granted injunctions will fall like a driving rain once the proposed electricity reform is passed by both chambers, due to the abject unconstitutionality of the initiative, according to specialists.  Batting cleanup, to borrow a phrase from the president’s (and our) pastime of choice, we also have our friends and partners in the United States Mexico Canada Agreement (USMCA), who have begun to let Mexico know that playing Three Card Monte with billions of dollars in already-executed foreign investment will bring fierce resistance and repercussions.  We hope to count the ways in which the 4T’s electricity reform is bad public policy in yet another post on the topic before long.  In the meantime, entering year three of the 4T, we are facing the prospect that despite putting an end to decades of corrupt and incompetent governance at the hands of the PRI and the PAN, the AMLO administration is managing to become the worst government we have had in living memory.

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