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Mexico's 'door is still closed' to private energy investment
![Mexico's 'door is still closed' to private energy investment](https://cdnimg.bnamericas.com/NUKGzoFRNFvSBrfArBndQCFyixtyQAEGtdqCstkdosvxoEwYwlZPKjeIUknadkhT.jpg)
Although Mexican energy regulator CRE has greenlighted some private sector permits despite government policy to favor state companies, experts believe that the sector will remain largely closed to private investments for the rest of President Andrés Manuel López Obrador's administration.
“What we can conclude is that the door is still closed,” independent energy analyst Rosanety Barrios Beltrán told BNamericas.
“What we have learned in this time [since 2018] is that this administration is not going to change its point of view, as it considers that only state companies should provide energy services despite what the constitution says,” she said.
López Obrador’s six-year term ends in September 2024.
During a press conference on Monday, the head of Mexico’s biggest business association CCE’s energy committee, Régulo Salinas, said that the private sector is waiting for the change of government to see if that door reopens.
“The new administration, whoever arrives, will have to be more pragmatic and will have to reopen the sector, specifically to ensure that the country has the energy it requires, be that electricity or oil,” he was quoted as saying by Forbes México.
Presidential elections are slated for June 2, and polls suggest the next president will be someone from the governing Morena party, with former Mexico City mayor Claudia Sheinbaum and ex-foreign minister Marcelo Ebrard currently the frontrunners.
Permitting bottleneck
While experts cite López Obrador’s goal to reverse parts of the 2013-14 energy reform as the main problem, CRE’s permitting backlog, involving 7,000 requests, has also drawn criticism.
During its last ordinary session on August 17, however, CRE approved 20 permits for self-supply and five for electric power cogeneration. Among these were permits pertaining to assets previously owned by Spain’s Iberdrola that are being transferred to a trust fund owned by the State after the firm agreed to sell some of its Mexican assets.
“When [CRE] finally gives a permit, you wonder ‘why that one?’ There seems to be no respect for the order of affairs,” Barrios said.
ALSO READS: Mexican energy watchdog treats permit-holders unequally, claims commissioner
Early in his administration, López Obrador asked the CRE to grant permits based on an energy policy framework that favors public companies CFE and Pemex, according to documents leaked to the press.
"The core of this policy is that no one else should generate energy until CFE can reach a theoretical 54% market share with the Iberdrola plants," Barrios said, adding that even though it achieved that target, the regulator "continues to have the door closed."
Shortly after López Obrador assumed office, the head of the CRE and three commissioners were purged.
“In order for us to get back to seeing the pace [of permit approvals seen five years ago], where the private sector could participate in the entire oil chain, the first thing we would have to see is the import permits issued by the energy ministry, which is not happening,” said Barrios, who also worked in the public energy sector.
“Granting of oil storage permits, which are currently zero, and commercial permits, that is, someone who wants to come in and sell new franchises, must also resume,” she said.
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Researchers at think tank CIEP said the current business models of the state-owned energy firms need major changes.
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