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Mexican electricity reform rollback to spark tensions with U.S. and Canada

mexican electricity reform rollback

The Mexican electricity reform rollback by the current administration by president Andres Manuel Lopez Obrador is set to spark tensions between the U.S. and Canada, as millionaire investments are at stake.

A fast-track bill introduced to Mexican congress would change the order in which power is placed to the Mexican grid; privates would lag behind, as the bill intends to replace national electricity company CFE as the main provider.

According to the Financial Times, this would be a particular hit to renewable producers; they had been dispatching electricity at the first place, as their input is the cheapest; now, they would stand last in queue, losing their premier spot.

The bill, one of the most radical after months of attempts to undermine private and renewable production in Mexico is expected to pass in Congress without any major drawback, as the ruling party, Morena, has the majority in both houses.

As for the Mexican government, the bill intends to end “years of pillage” by the private sector. In recent moths, Mexican president AMLO has been vocal about the private’s role in the Mexican energy sector.

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No more electricity form renewables in Mexico

In early January, a national electric outage initiated a debate in which the Mexican government fingered renewable producers as the main responsible. Then, Luis Bravo, head of corporate communication of CFE said renewables would be out of the system, to “ensure grid’s stability and reliability.”

For Carlos Ramírez, of the firm Integralia, quoted by the FT, the move is “an open war; a sign of the government becoming more radical.” Sources consider such a move would put nearly $41 billions of private investment at risk.

Experts forecast this would spark a series of lawsuits under the USMCA treaty, as it undermines already accorded energy trade framework.

“Although this bill does not mention expropriation or nationalization, it does seem like the kind of action that could be considered to have expropriatory effects,” said Pablo Zarate, managing director at FTI Consulting.

The bill will be discussed in the next 30 days, and it is expected to enter into action in early March.

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