Could AMLO upset Mexico's energy reform?

Thursday, January 18, 2018

Left-wing presidential candidate Andrés Manuel López Obrador (pictured) has softened his stance regarding his intentions to reverse or modify Mexico's 2014 energy reform, which permitted greater private participation in the oil & gas and electricity sectors. But despite the softer stance, AMLO could still rattle investors in the lead up to the elections on July 1.

AMLO, had promised early last year he would reverse the reform if elected, and if the most recent opinion polls have it correct, he might even obtain a majority in congress and the senate to follow through.

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Mitofsky's latest monthly poll puts AMLO ahead of his rivals, with 23.6% of voter preference, followed by PAN party candidate Ricardo Anaya with 20.4%, and ruling PRI party candidate José Antonio Meade with 18.2%.

In February last year AMLO said he would allow a referendum on the reform, putting it up for debate. He also promised that he would halt the signing of new contracts between the government and private firms, and put already signed contracts under review.

This stance represents a softening of his earlier position, when only weeks ago he said that he would "cancel" the reform and return the country's oil "to its people," even though he admitted at a rally in Nuevo León state in August that the reform contains "some good things" and vowed to keep it.

AMLO acknowledged that salvaging the energy sector is fundamental because it's a lever for national development, to create jobs and benefit the people.

José Luis Beato, business representative of AMLO's Morena party in Mexico City, clarified in a TV interview in August that "It has not been said that private investment will be expelled from the energy sector, and it has not been said that the sector will be nationalized."

"For the reform to be reversed there must be a majority in congress, which is difficult," he said.

Also read: AMLO's blueprint for governance targets corruption, money laundering

López Obrador has blamed Mexico's sharp gasoline price hikes on the reform, and he is the only candidate so far to have nominated an energy minister in case of an election victory.

Rocío Nahle (pictured below, center) a Morena lawmaker for Veracruz, coordinator of the party's parliamentary faction and a graduate in petrochemical engineering, "knows what needs to be done to rescue the sector," López Obrador said.

Nahle outlined her plans in a video she shared via Twitter. She wants to build two new oil refineries and claimed that "with the energy reform, Mexico ceased to produce oil, gasoline was imported and we have a severe energy dependency that must be reversed."

Her nomination has sparked unease, however.

"The only concern I've heard raised is about his pick for energy minister, who is a Morena lawmaker and who has been critical in the past of Peña Nieto's energy reforms," Anna Szterenfeld, Latin America and Caribbean regional manager for the Economist Intelligence Unit, told BNamericas in an interview.

About AMLO, Szterenfeld said "There are fears that he would try reverse [the reform] or at least slow it down. But on the macroeconomic front, I don't think he's going to try to risk the reputation for stability that Mexico has achieved over recent years."

She also predicted an AMLO government – contrary to current polls – would not have a parliamentary majority and struggle to pass legislation.

"He won't be able, for example, to reverse the energy reform, because it's a constitutional reform, and in order for him to do that, he'd need to have a two-thirds majority, which he's not going to have."

"Where he will have some authority, of course, is in slowing down some of the reforms. Going back to the energy sector, the energy ministry will control the pace of any kinds of tenders for private sector participation. This could slow down changes to Pemex," she said.

Nahle has not answered BNamericas interview requests.