New Rules and the Urgency to Attract Private Investment

The new rules of the game in Mexico’s energy sector — following the reforms to the Electricity Law and the Hydrocarbons Law — provide a foundation that, while still insufficient to define the level of private investment available for key projects in the national energy plan, represents a relevant starting point. For now, there are positive aspects to highlight that the private sector has received well, the main one being that the door remains open to private participation and that communication channels are being established to exchange ideas and proposals. However, detailed regulations, administrative provisions, and specific guidelines are still needed to provide the clarity required to define the level of interest and volume of private investment in the coming years.

Additionally, the new rules radically shift the project allocation hierarchy. Under the previous framework, competitive bidding processes were the standard; under the new framework, such processes are now the exception. Given the preferential treatment established for state-owned companies, these entities now have the final say in choosing their private partners for certain projects. While this statist vision may not be shared by most leaders and technical experts in the energy sector, it is at least consistent with the current administration's political vision.

From another angle, the statist approach reflected in these new rules aligns with the political course Mexico has taken since the 2019 change in government. It is worth reflecting that the energy Mexico needs must consider the country’s geographic and social inequalities. From this perspective, the dominance given to state-owned enterprises (PEMEX and CFE) seeks to guarantee control and decision-making over a fundamental issue: delivering energy where it is most needed, fostering positive economic impact in historically underserved communities and regions. To illustrate this point, consider a hypothetical scenario where an energy project requires similar investment conditions in either Nuevo Leon or Campeche. Most investors would likely choose the former due to factors like logistics and labor availability. However, the southeastern region of Mexico faces greater development needs and deeper inequality. This underscores the government’s logic in seeking greater control over how and where energy development is directed.

Will this new vision for the energy sector truly attract private investment? The short answer is yes, but many conditions must be met. In recent conversations with several directors of private operators and sector leaders, many considerations emerged, which their legal and commercial teams are evaluating. The central question remains whether there will be sufficient certainty to make investment decisions while mitigating associated risks. This certainty hinges on addressing several key questions:

• If PEMEX must hold a minimum 40% stake in joint ventures, what exactly will it contribute? Existing infrastructure? Government permits and facilitation? How will its contribution be evaluated to ensure it truly represents that 40% equity?

• What criteria will be used, and how will coordination between CFE and private players be implemented to meet the goal of CFE generating 54% of national electricity? This is especially relevant in a market characterized by high variability and challenges in grid reliability and stability.

• Contractual models for mixed investments are still pending, but in the meantime, will these contracts allow for expert panels or international arbitration? In other words, what mechanisms will provide sufficient legal certainty to justify significant investments before boards of directors?

• Will optimal operational decisions be allowed? For example, if a private entity wants to participate in a project involving existing PEMEX or CFE infrastructure, will those assets meet acceptable technical standards? Will they comply with the safety and efficiency levels expected by private operators? Given the current financial weaknesses of state-owned enterprises, will they be willing to cede operational control when technically justified?

• Regulatory bodies, which were previously autonomous and technically robust, are now under the authority of the Ministry of Energy. Will they maintain the necessary technical independence and avoid conflicts of interest?

These and other questions are now at the forefront for many energy sector leaders. The answers that emerge will be crucial in shaping private sector participation in future partnerships and contracts with the government.

For now, the new legal framework and the Ministry of Energy’s strategy for PEMEX and CFE appear more attractive to Mexican companies with a history of working with the government. These firms may be more inclined to take on risk than foreign players. However, this is not ideal. The challenges Mexico faces in ensuring the energy it needs and achieving sustained growth require the involvement of diverse actors with complementary technical, financial, and technological capabilities.

Conclusion

The regulatory overhaul of Mexico’s energy sector reflects a vision aligned with national development goals and stronger state control, but it remains to be seen whether this vision can translate into a viable and attractive operating environment for private investment. Success will depend on whether secondary regulations and partnership models provide sufficient legal, technical, and financial certainty. While domestic firms may be more adaptable, the energy development that Mexico needs to ensure growth, equity, and sustainability requires the participation of a broad set of actors with proven capabilities and long-term vision. The real challenge, therefore, is to build a framework that enables collaboration rather than exclusion.