Mexico President Andrés Manuel López Obrador, or AMLO, is ending his term the way he started it – by lambasting the nation’s regulators and accusing them of being in cahoots with private business interests.
On Monday, the president said he would try to push a bill through Congress in his final months that would eliminate oversight agencies including energy regulator Comisión Reguladora de Energía (CRE).
CRE oversees natural gas regulations and permitting. It also publishes the IPGN monthly natural gas price index, a compilation of post-transaction prices reported anonymously by shippers.
“There are lots of onerous organisms that don’t have any purpose. They’re superfluous expenses,” López Obrador said during his morning press conference. He mentioned the CRE as well as competition watchdog Cofece among a list of regulators he would scrap.
Business group Instituto Mexicano de Ejecutivos de Finanzas (IMEF) expressed its “profound worry” over the proposal.
“The elimination of these autonomous entities not only would compromise the stability and economic development of the country, it would also go against the constitutional principles of competitiveness and the model of a state that guarantees a level playing field for all participants in the market,” the group said in a statement.
In a previous attempt at a similar overhaul in 2021, López Obrador sent to legislators a proposed energy reform that would have done away with the CRE as well as upstream regulator Comisión Nacional de Hidrocarburos (CNH). The proposal never saw the light of day.
Bluff?
Analysts suggested nothing will come of it.
“It is just a bluff as the AMLO administration does not have the numbers in Congress, especially in the Lower House,” Mexico energy expert Gonzalo Monroy told NGI’s Mexico GPI.
“So, what is behind the latest bluff? I think the president gave us the answer directly in his press conference. He wants to be on the record in his opposition to the regulatory architecture that, in his view, was not created to protect the state's interests,” he said.
In other words, it represents a spat between the AMLO administration and the institutions of the 2013-2014 energy reform that refuses to go away.
Regulators Under Fire
Energy regulators in general have been weakened during the ongoing administration. They have seen their budgets slashed, with key staff removed. They have also been instructed to favor state firms Comisión Federal de Electricidad (CFE) and Petróleos Mexicanos (Pemex) in their decision-making.
Researchers at Mexican thinktank Instituto Mexicano para la Competitividad (IMCO) have said one of the weaknesses of the CRE is that it is beholden to political pressures. They cited the fact that between April and October of 2019 the government named six of the seven CRE commissioners.
Meanwhile, as the government has preached austerity, it has pumped funds into the perennially loss-making CFE and Pemex.
“There are a lot of companies upset with CRE and a lot of legal processes to protest against their decisions,” Gadex consultant Eduardo Prud’homme told NGI’s Mexico GPI. “This is not good for investment and you can see that Pemex and CFE are treated differently.”
The United States government has cited unfair practices in its ongoing energy dispute with Mexico which it considered to be a violation of the U.S.-Mexico-Canada-Agreement, or USMCA.
Last year, the Office of the U.S. Trade Representative (USTR) announced a request for dispute settlement consultations under Chapter 31 of the USMCA, claiming that Mexico’s public policy and regulatory actions during the current administration have negatively impacted U.S. companies in the energy sector.
After more than a year of consultations and discussions, there has been little progress in the matter. It could end up reaching a panel process before the end of the López Obrador sexenio, or six-year term.
Mexicans go to the polls in June of next year to vote for a new president. AMLO’s chosen successor, former Mexico City mayor Claudia Sheinbaum, is ahead in polling.
