Maintaining power

Mexico’s electricity reform fails - markets are happy, the president is not.

This week a controversial reform of Mexico’s electricity sector failed to get lawmakers’ backing in a vote labelled as “treasonous” by president AMLO. The bill would have increased the say the government has over electrical power generation – unsurprisingly, markets were deeply rattled by the prospect of this coming to fruition. Greater state intervention in the sector would have negatively affected private sector confidence at a time when Mexico is in dire need of greater investment in the energy sector.  

A columnist and automotive industry lobbyist based in Mexico explained, “During the first part of AMLO’s six-year term, he carried out 55 reforms. However, the most emblematic one, which was the electricity reform, failed to be adopted because it did not garner a two thirds majority (334/500) in the Chamber of Deputies.”

“…the electricity reform failed to be adopted because it did not garner a two thirds majority (334/500) in the Chamber of Deputies.”

A columnist and automotive industry lobbyist, Mexico

The congressional defeat reflects an opposition more galvanised and better organised than many pundits had thought possible. The PRI-PAN-PRD-MC bloc effectively resisted the pressures of the ruling Morena party and showed that it can function as an effective counterweight to AMLO, in addition to giving oxygen to a common presidential candidacy towards 2024.  

Licking his wounds over the electricity reform, AMLO now looks set to turn his nationalising zeal to another energy source, lithium. Somewhat unusual given that lithium reserves in Mexico remain unconfirmed. Nonetheless, Mexico’s automobile industry, a nationally important sector – which could benefit from a lithium windfall – is watching the move closely.  

An executive at Mexico’s Association for automobile distributors explained, “Experts have found no genuine evidence of the existence of lithium in Mexico. Several political and industry figures have said that in Sonora and Durango there may be significant amounts, but there is no certainty, so far. Former secretary of foreign affairs Jorge Castañeda recently stated that Mexico does not have confirmed reserves as in Chile, Argentina among others in the region.”

“Experts have found no genuine evidence of the existence of lithium in Mexico. Several political and industry figures have said that in Sonora and Durango there may be significant amounts, but there is no certainty, so far.”

An executive at Mexico’s Association for automobile distributors

If the existence of lithium is confirmed, there are more questions than certainties. How will an administration enduring a serious fiscal crisis create an effective institution to explore and exploit lithium?  

The infrastructure for lithium comes from abroad and studies on the matter in Mexico are in the experimental phase. Will it depend on foreign countries again and from which countries would machinery and technical expertise be sourced? Some specialists believe that to obtain initial results, it would require almost a decade just for the exploratory phase alone. Cutting-edge lithium and mineral research require resources in science and technology – significant budgetary cuts in fiscally-intensive areas including health and education will need to be made to afford such technology.  

“AMLO has blown up the bridges of understanding with the private sector and especially with large transnational corporations,” added the executive. A new mining law is regarded by many in the automobile industry as little more than a disguised nationalisation of lithium, which is a fundamental part of electromobility batteries. Without a clear policy on energy transition in electromobility, AMLO’s reform efforts will remain a mirage. 

 

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