Lawmakers gear up for Sunday’s showdown vote on energy future

Mexico’s opposition politicians plan to reject a radical energy reform pushed by the country’s nationalist president in an Easter Sunday vote that will be closely watched by investors.

The constitutional reform, which would guarantee state electricity group CFE 54% of the market, has spooked the private sector, opposition and U.S. government. Critics argue that it would be bad for investment, the economy and the environment.

The reform would transform the regulatory landscape for electricity, including by canceling existing power generation permits and prioritizing CFE power over private renewables on the grid.

The ruling Morena party has tweaked its proposal slightly and won at least one vote from the opposition Institutional Revolutionary Party (PRI). But a constitutional change requires approval by two-thirds of lawmakers, which is highly unlikely barring last-minute surprises, say analysts.

“A constitutional reform cannot pass without our consent and votes . . . and they don’t have it,” said Santiago Creel, vice-president of the lower house and a deputy for the opposition conservative National Action Party (PAN).

Since the reform was put forward in October, business leaders, the government and lawmakers have negotiated behind the scenes and debated in public. But the gap between the visions of energy nationalist President López Obrador and the opposition that opened the markets to private investment in 2013 has been too wide to bridge.

Instead, Sunday’s vote is more for López Obrador to make a political point, say analysts. The government wants to paint the opposition as representing the interests of foreign energy companies while it is working for the Mexican people.

“Citizens will pay attention to who votes for national sovereignty and who defends the interests of the transnational companies. The homeland comes first!” the president’s spokesperson, Jesús Ramírez Cuevas, said on Friday, citing a leader of Mexico’s movement for independence from Spain.

López Obrador, who grew up in an oil-producing state and is a firm believer in state control of oil and electricity, thinks the liberalization of the sector was plagued by corruption and too favourable to private companies.

“It’s not just another topic, one more item on the agenda but rather it’s something at the heart of [his] . . . agenda, because it’s at the heart of the history of Mexico,” said Lorenzo Meyer, a historian who is broadly supportive of López Obrador’s administration. “The opposition can vote down the bill but not the idea.”

Energy experts agree, and doubt the sector will see much new investment even if the constitutional reform is rejected. The government has other tools at its disposal, such as blocking permits through regulators and trying to implement a secondary bill that the Supreme Court did not throw out in a ruling earlier this month.

“The energy sector isn’t going to change, it’ll stay as it’s been until now without investment or with very focused investment,” said Carlos Ochoa, a lawyer in Holland & Knight’s Mexico City office who has worked in state companies CFE and Pemex.

He said the vote was also important for the broader economy and investment climate. “If the reform doesn’t pass . . . it is a good message for other industrial sectors to know that at least there are checks and balances,” he said. López Obrador has said if the reform is voted down, he will send a new initiative to congress to nationalize the country’s lithium resources.

His coalition has the simple majority to pass secondary legislation. The issue is less immediately material to the private sector as the value of Mexico’s lithium, which is mostly in clay deposits that are difficult to mine, is unclear.

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