AMLO government reforms create uncertainty in investing in Mexico

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The vice president of the Association of Bankers of Mexico calls for clarity in the laws to avoid litigation and to promote an adequate environment for investments.

Representatives of Mexican and foreign banks warned this Thursday that there is growing uncertainty created by the recent reforms promoted by the Government of President Andrés Manuel López Obrador.

The reform to the Electricity Industry Law, published this week to “strengthen” the Federal Electricity Commission (CFE) to the detriment of private companies and foreigners, and another that is being discussed to force Banco de México (Banxico) to buy dollars in cash of remittances were analyzed by those attending the Banking Convention of Mexico that began this Thursday.

“The worst thing that can happen to investment is uncertainty and that is why we do feel in the union, and we share the concern, that when in doubt investment remains cautious,” said Raúl Martínez-Ostos, vice president of the Association of Bankers of Mexico (ABM).

Martínez-Ostos, also CEO of Barclays Mexico, spoke about the litigation that the electricity reform will create, which requires a retroactive review of self-supply and independent energy producer contracts.

The reform, published this Tuesday in the Official Gazette of the Federation, also eliminates the economic criteria to first dispatch energy from hydroelectric plants and fossil fuels from the Federal Electricity Commission (CFE) over private renewable power plants.

“What we need is clarity, avoid litigation, protection in this matter and try to bring the private initiative closer to the public sector. Understand the law well and what can be done to create an environment of certainty that encourages investment, ”said Martínez-Ostos.

The bankers also reiterated their concern about the reform to the Banxico Law proposed by the ruling National Regeneration Movement (Morena), which would force the central bank to buy dollars that private banks cannot repatriate.

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The initiative would violate the autonomy of Banco de México and would put it at risk of money laundering.

“We have declared that we are very concerned about the transfer of this residual risk to Banxico with the issue of the use of dollars in cash, and we will continue to be very vigilant,” said Adrián Otero, CEO of Scotiabank.

At the initial press conference, bankers warned of the slowness of the economic recovery after the historic drop of -8.2% in gross domestic product last year.

Industry leaders urged accelerating vaccination against COVID-19 and job recovery.

“Banking is always a true reflection of what our clients do and we accompany our clients in what they are doing. In other words, when there is growth, it is because clients are investing, ”said Eduardo Osuna, vice president, and general manager of BBVA Mexico.

Despite these statements, the outgoing president of the ABM, Luis Niño de Rivera, highlighted the “consistency” of López Obrador due to his austere budget and the stability of the public debt.

“Confidence in economic policy depends on consistency. The President of the Republic has been very consistent between what he said in the campaign and as president-elect, and what he has done since he took office on December 1, 2018, ”he said.

Source: expansion.mx

Mexico Daily Post