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New bill proposal to increase Pemex market dominance

New-bill-proposal-to-increase-Pemex-market-dominance

Today, Mexico’s lower house energy commission passed a bill that, if allowed, would entirely end limits on Pemex’s market dominance. Accordingly, this permit would remove the country’s hydrocarbons law requirements on Pemex concerning transparent discounts and disclosure publications.

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Pemex to possibly increase its market dominance

In fact, this is the third fast-tracked energy proposal since early March aimed at boosting state-owned energy companies, including Pemex and Comisión Federal de Electricidad (CFE by its Spanish acronym).

This Wednesday, Mexico’s lower house energy commission passed a bill that, if allowed, would entirely end limits on Petróleos Mexicanos’ (Pemex by its Spanish acronym) market dominance.

Indeed, this is the third fast-tracked energy proposal that Morena (Mexico’s current ruling party) raises since early March. Accordingly, the current administration aims to boost state-owned companies with respect to foreign and national private energy investors.

Moreover, this bill would remove the country’s hydrocarbons law requirements on Pemex. Besides, it would eliminate transparency requirements for the Company.

For instance, since the 2014 Energy Reform, Pemex has been required to offer fair and transparent discounts to its gasoline, diesel, jet fuel, and LPG buyers. This requirement also applied to some petrochemicals.

Moreover, the Company has also been required to make public some of its pricing formulas and details. For instance, these pricing formulas include transportation fees which, in contrast, are not necessary for private-sector companies.

Other market-dominance proposals

Although these provisions were initially temporary, intending to increase competitors’ competitivity within the market share, Morena argued they were still in place.

In contrast, opposition lawmakers said that Pemex’s monolithic power was far from over with these restrictions. For instance, Mexico’s competition watchdog Cofece concluded that the Company still controls large markets.

Besides, the energy regulatory commission (CRE) already ruled that Pemex no longer had to follow specific pricing rules for gasoline since December 2019. However, the Company continues to publish its discounts and prices and follows pricing guidelines from the CRE. In fact, these restrictions are still part of Mexico’s hydrocarbons law.

Similarly, this bill follows another proposal to make fuel market operating permits more difficult to obtain for competitors. Accordingly, this proposal is set for a vote in the full Senate tomorrow. In fact, the Senate energy commission passed the bill 9-6 on Tuesday after the lower house approved it earlier this week.

Moreover, Congress passed a reform to the country’s electricity law in early March. Notably, this proposal sought to prioritize state-owned power generation primarily. Nevertheless, the Supreme Court suspended the bill following a series of court decisions against it.

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