Mexico’s President Andrés Manuel López Obrador announced a new package of 20 constitutional reforms on Monday evening.
They include plans to scrap autonomous regulators such as competition watchdog Comisión Federal de Competencia Económica (Cofece) and 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. Cofece officials have been critical of the president’s policies that they say hurt competition.
López Obrador in his announcement called the independent organizations a waste of public funds that only served “the oligarchy.” The funds would instead be diverted to public pensions, he said.
The president also said he would push for a constitutional ban on hydraulic fracturing, or fracking, as a method to extract oil and gas resources.
Additionally, López Obrador said he would reinstate state utility Comision Federal de Electricidad (CFE) as a “strategic public company in benefit of domestic consumers and in the national interest.”
The announcement comes on the heels of yet another failure to modify rules in the country’s energy sector. Last week, the nation’s Supreme Court sided with six companies who had filed an injunction against a reform of electricity industry law (LIE) that would have given CFE priority over all other companies in power dispatch.
Supreme Court Minister Luis María Aguilar said the company had to compete on equal terms with other market participants.
Election Posturing
A two-thirds majority in Congress is needed to change the constitution. The president’s Morena party lacks this majority. But in the upcoming elections, some 20,000 public positions are up for grabs including an overhaul in the Senate and Lower House.
López Obrador’s handpicked successor Claudia Sheinbaum is leading in the polls for the June presidential elections and has said she would continue with his overall policy program.
The reforms announced by López Obrador also include cutting the number of lawmakers in Congress and changing the way judges are appointed.
Opposition candidate Xóchitl Gálvez on Monday applauded the Supreme Court ruling that invalidated the LIE modification.
“Fortunately, the court has ruled that the reforms are unconstitutional,” Gálvez said Monday through an interpreter during an event hosted by the Wilson Center think tank in Washington, DC. “This means that the reform will go back to being what it was back in 2013.”
Gálvez has also said that she would strengthen regulators and those entities that have been weakened in the last six years.
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 CFE and Petróleos Mexicanos (Pemex) in their decision-making.
Researchers at Mexican thinktank Instituto Mexicano para la Competitividad (IMCO) have said the CRE is beholden to political pressures. Meanwhile, as the government has preached austerity, it has pumped funds into CFE and Pemex.
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.
In 2022, 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.
