Last Sunday, Mexican President Andrés Manuel López Obrador suffered the biggest legislative setback since he was sworn in in 2018. After a 13-hour heated legislative debate, López Obrador’s Morena party failed to garner the 334 votes needed to pass the much-anticipated electricity reform bill in the lower house of Congress.
The bill, which was anticipated to fail days before being debated, sought to “re-establish Mexico’s energy sovereignty” by limiting the liberalization of electricity generation that had been initiated in the 1990s. In recent years, the Comisión Federal de Electricidad (CFE), Mexico’s state-owned electric generation and distribution company, lost market share due to the cheaper cost of production from private firms. If the constitutional reform had been approved, CFE would have secured 54 percent of the market—compared to the 38 percent it currently possesses—while the private sector’s market share would have been reduced and its investment contracts canceled.
The reform’s backers argued that the Mexican government needed to gain back control over the electricity sector. They warned that if things did not change, by the end of the decade, 85 percent of the electricity market would be owned by foreign companies, and thus, prices would be controlled from abroad. In contrast, opponents suggested that López Obrador’s initiative would have produced more expensive and dirtier electricity, harmed competitiveness, halted Mexico’s energy transition, and breached the USMCA investment provisions. Critics suggest that López Obrador’s reform is also the result of the need to relocate Pemex’s fuel oil surpluses—a harmful byproduct of the oil refinement process that could be used to generate electricity. Although López Obrador failed to pass this controversial bill, he received support on Tuesday in the lower house of Congress to approve the nationalization of the country’s lithium reserves.
