Mexican president wants to reverse major energy reforms

President Andrés Manuel López Obrador has stepped up his assault on Mexico’s energy reform, sending a bill to Congress to allow the government to suspend permits granted to private companies in the hydrocarbon sector and grant a Pemex more control.

Imports and exports of fuel and petroleum, storage and distribution permits could be suspended under the bill for reasons of national security – a vague and discretionary definition that experts say would only increase l uncertainty and alienate investments in the sector.

The bill is the latest attempt by nationalist López Obrador Turn the clock and unraveling the energy reform of 2013 – which he said was an attempt to ruin Pemex and the CFE utility – without changing the constitution.

Earlier this month, Congress approved sweeping changes in the electricity sector that would prioritize the production of more expensive and dirtier CFEs over cheap energy from renewables. After a host of injunctions, this bill has now been put on hold.

Friday’s bill is unlikely to run into obstacles in Congress, where Lopez Obrador has majorities in both chambers. But it would also trigger legal challenges, analysts said.

The bill has shown that López Obrador is not giving up on his ambitions to give back to public energy companies what he sees as their rightful place at the heart of the economy. “There is no doubt about the leading role that Petróleos Mexicanos should play,” he wrote in the introduction to the bill.

Alfredo Sandoval, economist at Banco Base, highlighted two other worrying elements. If a permit were suspended, the government could send a state-owned production company – as Pemex and CFE are known – to run things, but without affecting legal ownership.

“This means that if you suspend the license for a gas station, Pemex can take over,” he said.

In addition, in a proposal to overturn the current rules, if the authorities did not respond to a permit request within 90 days, the permit would be considered not to have been granted.

“It’s a more efficient way to deny permits,” Sandoval said.

Gonzalo Monroy, an energy consultant, said the bill would not allow the government to suspend licenses granted to private oil companies in historic auctions following the reform, which ended Pemex’s monopoly on the sector for eight decades. But it could suspend a license to allow a company to export the crude oil it produced.

The reform also freed service stations from the obligation to purchase fuel from Pemex. Under the bill, such import permits could be frozen, analysts said.

“It is unfortunate that the Mexican government persists in pursuing bad energy policy, with blatant disregard for our health, our environment, our competitiveness, our investments, our jobs, our laws and our trade treaties,” he said. said Armando Ortega, who helped negotiate Nafta free trade in Mexico. deal with the United States and Canada which has now been updated as USMCA.

“Any revocation can be interpreted as ‘tantamount to an expropriation’ under the investment chapters of the USMCA, the CPTPP and the Mexico-EU free trade agreements,” he added. “They have to be very careful.”

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