Mexico’s Executive Needs Broader Consensus for Desired ReformsBy Cas Biekmann | Fri, 06/11/2021 - 14:26
President Andres Manuel López Obrador said this week that the option of pushing another energy industry reform through Congress to save state utility CFE is still on the table. Such sweeping reforms have become more difficult to pass now that the ruling coalition lost seats after the June 6 elections. To foster change, López Obrador would need to garner a broader consensus on the one hand. On the other hand, opposition parties need to ensure its members toe in line.
"If they are necessary, I will present them even if they do not pass or are rejected," López Obrador said this week in regards to the reforms, hinting that the damage to CFE that could occur after such a rejection would then be on the opposition’s hands. The President remained adamant that CFE needed to be rescued, whether the coalition had lost seats or not.
The president has often spoken about how Mexico’s state-owned companies have been forced into a less-than-advantageous position due to the 2014 Energy Reform, which opened the doors for private participants in the previously monopolized energy market. The President often emphasizes the need to “rescue” PEMEX and CFE because their competitiveness in the market has been decimated, for instance by focusing on the lowest cost of energy (LCOE) when deciding the order in which power plants are dispatched. This puts private, renewable energy plants at an advantage over CFE’s aging power producing portfolio.
Nevertheless, the 2014 Energy Reform still enjoys support in the country, having become a focal point for foreign investment and clean energy development needed to meet critical climate goals. To modify the previous reform, López Obrador’s Morena would need a qualified majority in parliament. This could prove to be complicated: preliminary results give López Obrador’s coalition 279 seats divided among MORENA (197), PVEM (44) and PT (38). This is 53 seats short of a qualified majority needed to fast-track large initiatives such as a reform. MORENA and its allies will therefore need to convince other parties to join its initiatives. “Any future initiative intended to reform the Constitution will require the consensus of not only one party and its allies but of the majority of the parties in the house, plus the approval of the majority of the 32 state legislatures,” explained Edmond Grieger, Partner at Von Wobeser y Sierra to Mexico Business News.
The election results are indeed a sign that big changes will need a positive involvement from the opposition, agreed Juan Manuel Ávila, CEO and Co-Founder of TOP Energy. Nevertheless, Ávila highlights the voting process for the reform to the Electricity Industry Law, which passed through Congress this April. The Green Party, despite with its 11 seats an ally to the government, voted mainly against the counter-reform. “27 percent of the PAN bench was absent, along with 6 percent of the PRI, 4 percent of MC and 8 percent of the PRD,” added Ávila, pointing out the importance of representation during votes. “This leads us to the conclusion that for there to be a good counterweight, not only a vast number of opposition legislators is needed, but also that they vote in the same direction as the rest of the bench or that they are present when the voting occurs,” he told Mexico Business News.