Reforms Threaten Foreign Investment in Mexico's Energy Sector

A recent analysis by S&P Global Commodity Insights warns that proposed reforms to the Mexican judicial system and cuts to government regulators could negatively impact Foreign Direct Investment (FDI) in the country's energy sector. The document, titled Proposed Reforms to Mexico's Judicial System and Regulators Raise Concerns in the Electric Sector, includes interviews with experts and industry leaders.

The government’s proposals include dissolving independent regulatory bodies such as COFECE, CNH, and CRE, transferring their functions to federal ministries. Additionally, they suggest reducing the judicial system and electing all judges, including those of the Supreme Court, by popular vote.

Concerns about these reforms have grown in energy forums, industry webinars, and private meetings. “Since their creation, independent regulators have made decisions based on technical criteria. If the government takes on these responsibilities and participates in the sector through its state-owned companies, impartiality could be compromised," an energy executive told S&P.

Julia González, Lawyer, González Calvillo, who represents companies in the energy sector, also expressed concerns about the changes to the judicial system: "Although it is not perfect, the judiciary has been very professional in corporate and energy law matters."

However, different private sector actors trust that the incoming government will open the doors for private companies to participate in energy projects. José Medina, President, Confederation of Mexican Employers (COPARMEX), announced that Marcelo Ebrard, incoming Minister of Economy, will focus on ensuring an adequate supply of resources to support additional energy projects. Medina highlighted that, while the current administration has promoted state-driven energy generation, with 46% coming from the private sector, the new administration aims to maintain this ratio in future investments in CFE. The goal is to identify and promote investment projects to ensure their effective execution. Additionally, Medina emphasized the openness to dialogue from Ebrard and Claudia Sheinbaum’s team, on issues related to competitiveness, health, and energy. This collaboration is expected to help advance investment projects that will benefit the country.

In July,  Ebrard  announced plans to encourage private investment to boost renewable energy production in Mexico. The government aims to achieve over 20GW of clean energy by 2030. This will require significant private investment in both energy and water infrastructure in the coming years, according to the Minister of Economy.