Image credits: Gobierno de México
News Article

Reform to Eliminate Subsidies/ Houses Pay More than Companies

By Paloma Duran | Fri, 03/26/2021 - 11:10

Campaign against Electricity Law Initiative. Manuel Bartlett, CFE Director, said that there is a campaign against the new Electricity Law Initiative and explained that the main reason is that the 2013 Energy Reform benefited private companies. Bartlett stressed that the government of President Andrés Manuel López Obrador aims to change this situation and introduce fairer rules. “There has been a campaign against the president over his energy bill. This campaign started from day one; there have been lies and constant slander and as a decision approaches, the campaign has escalated,” said Bartlett.

Reform to eliminate energy subsidies for large companies. López Obrador announced that he will present a reform to eliminate electricity subsidies granted to large companies. López Obrador explained that thanks to all the constitutional reforms made with the Energy Reform, large companies and commercial chains pay less than domestic consumers. "We are not going to allow them to continue looting and hopefully they will understand us," López Obrador said. Miguel Reyes, Director of CFE Energía, said the subsidies represent a loss of MX$50 billion (US$2.43 billion) for CFE. Reyes asked the judges, who suspended López Obrador's energy law, to review the subsidies and their negative impacts on the Mexican economy.

Government loses MX$471 billion to subsidies. Reyes announced that the subsidies granted to companies represent a loss of MX$471 billion (US$22.89 billion) for the government. Reyes highlighted that this money would be enough to carry out 10 rounds of COVID-19 vaccinations in the country. "There is no contract or agreement where we do not find disadvantageous conditions. The total amount of all subsidies is MX$471 billion, which could be used to help our most vulnerable population," Reyes added.

Iberdrola, Oxxo, Walmart and Bimbo benefit from subsidies. Reyes explained that CFE's loss due to subsidies to companies such as Iberdrola, Oxxo, Walmart and Bimbo is equivalent to the electricity consumption of the entire state of Chihuahua in one year. “Iberdrola has received 26 percent of these subsidies and, as I said, we do not receive income because those clients were taken from us. In the case of these companies, the amount we lost is around MX$1.1 billion (US$5.35 million),” Reyes said. Meanwhile, companies like Oxxo receive a government subsidy of MX$26,544 (US$1,289.8) and pay MX$14,052 (US$682.80) per month, which is similar to what grocery stores pay.

López Obrador invites businessman to debate in his morning conference. López Obrador invited executives and representatives of companies such as Oxxo, Walmart and Bimbo to the daily news conference or any other forum to discuss and debate the issue of subsidies. “If the businessmen like Mr. Fernández from Oxxo or the owners of Walmart and Bimbo or even their spokesmen want to come, we can debate,” said López Obrador.

Self-sufficient companies are lost clients of CFE. Bartlett explained that self-sufficient companies are used to avoiding taxes under the justification of bringing new private investment to Mexico. “For example, a company that sells to individuals does not pay to the electricity network. This is called a postage stamp and there are currently 223 self-supply plants with 7,256 partners, who are lost clients of CFE. The largest and wealthiest companies are accommodated in this mechanism to avoid paying the network and taxes,” said Bartlett. Bartlett highlighted that middle-class families pay more for electricity than the major large companies in Mexico. Reyes explained that this problem stems from the reforms implemented since 1992, which forced "lower- and middle-class families to pay more than corporations."

CFE produces 55 percent of the country's clean energy. Bartlett said, "due to the previous reform CFE is forced to buy clean energy even though it produces 55 percent of clean energy in Mexico." In addition,  Bartlett explained that CFE does not receive certificates to prove it; however, it has to grant these certificates to private companies, which cost around US$7 billion.

Click HERE for full transcript in Spanish

The data used in this article was sourced from:  
Gobierno de México, Milenio
Photo by:   Gobierno de México
Paloma Duran Paloma Duran Junior Journalist and Industry Analyst