October 19, 2021

Latam

MEXICO: Political considerations behind electricity reform

BY Nicholas Watson

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( 3 mins)

The political noise surrounding President Andres Manuel Lopez Obrador (AMLO)’s electricity sector reforms persists even if little significant movement has occurred since it was unveiled on 1 October. The reform, which would restore the state-run CFE electricity utility to a de facto monopoly position, requires two-thirds majorities in both chambers to advance. The coalition led by the National Regeneration Movement (Morena) falls short of this threshold, which puts the opposition Institutional Revolutionary Party (PRI) into a kingmaker role. Even so, it is far from clear that the reform can pass, though AMLO may have other intentions that speak to his longer-term political plans.

Inside the PRI

The PRI is divided over how to proceed. This week, a group of former party presidents came out in opposition to the reforms, warning that the PRI risks becoming a Morena satellite if it supports AMLO’s controversial plans. Some PRI senators have also declared their opposition; they have been more explicit than their lower house counterparts. The PRI leader in the lower house, Ruben Moreira, together with party president Alejandro Moreno, are notably hesitant. There is speculation that AMLO may have compromising material on Moreira (a former Coahuila state governor) in particular. How many PRI votes could end up swinging behind the reform is difficult to say and could depend on whether AMLO is prepared to dilute his proposals.

AMLO’s political blueprint?

PRI divisions could point to a supplementary intention: to break the PRI as an end in itself but, most importantly, to weaken the opposition pole centered on the National Action Party (PAN). Recall that the PAN, the PRI, and the Party of the Democratic Revolution (PRD) formed an alliance ( Va por Mexico ) in 2020. If the political system is going to solidify into two poles pitting Morena plus its allies against the PAN and its allies, AMLO wants to weaken the opposition to secure the ultimate part of his legacy, which is to ensure Morena remains in power from 2024. In the short term, at least, this may mean that the electricity reform as it currently stands is not necessarily the main objective.

Morena forever…

Other political considerations suggest that presenting the reform may be just as – if not more – important as getting it passed. It keeps Morena radicals (including Energy Minister Rocio Nahle and CFE head Manuel Bartlett) fired up for the 2022 presidential recall referendum and for what could end up being a bruising internal battle to succeed AMLO. If the reform is blocked, AMLO may still consider he has benefitted because he can argue that “neo-liberals” and “reactionaries” continue to block transformation, which only underlines how Morena needs another six years in power. AMLO would also sidestep complicated and costly international litigation that would likely arise if the legislation passes.

…or not

AMLO’s approach is far from risk-free. Most obviously, the proposals are damaging already-weakened investor confidence – witness Bartlett’s recent threat that no compensation would be paid to foreign companies in the event the reform passes. In more purely political terms, the whole issue risks creating divisions within Morena; the leading Morena Senator Ricardo Monreal, whose own presidential aspirations AMLO appears determined to frustrate, has publicly refuted Bartlett. If Morena cannot stay united, the reform would face an even more uncertain future.

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