Mexico Moves To Re-Nationalize Energy Markets – A Return To 1938? (Opinion)

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MEXICO CITY, MEXICO - JULY 03: Newly elected President of Mexico, Andres Manuel Lopez Obrador, speaks during a press conference to the media after a private meeting with Outgoing President Enrique Peña Nieto as part of the government transition at Palacio Nacional on July 3, 2018 in Mexico City, Mexico. President elect Andres Manuel Lopez Obrador won the Mexican elections by 53% and will assume office on December 1st, 2018. (Photo by Manuel Velasquez/Getty Images) Getty Images

By David Blackmon Senior Contributor Energy (FORBES MAGAZINE)

David Blackmon is an independent energy analyst/consultant based in Mansfield, TX. He is the Editor of Shale Magazine and co-host of In The Oil Patch Radio, a nationally-syndicated weekly show. David has enjoyed a 40-year career in the oil and gas industry, the last 23 years of which were spent in the public policy arena, managing regulatory and legislative issues for various companies, including Burlington Resources, Shell, El Paso Corporation, FTI Consulting, and LINN Energy. He recently came up with this opinion piece on AMLO’s energy policies, check it out…

Recent moves by Mexico’s government targeting the country’s energy industry have led to increasing concerns that President Andrés Manuel López Obrador (AMLO) intends to ultimately re-nationalize the nation’s entire energy sector. This happened once before in 1938 and has never served Mexico’s national interest well, a reality that ultimately led to reforms to allow international energy investment enacted during the Enrique Peña Nieto presidency in 2014.

AMLO has never made any secret of his leftist leanings. His anti-business ideology has characterized his policy positions throughout his career in Mexican politics. That reality led many to speculate during the 2018 election campaign that, if elected, he would likely move to re-nationalize his country’s energy sector, reversing the Peña Nieto reforms. 

Those energy reforms were historic and badly needed, after decades of decline and mismanagement at PEMEX, Mexico’s state-run oil company. The reforms ushered in billions of dollars of new investment from global leaders in energy, creating new jobs, new oil and gas discoveries, new energy-transportation infrastructure and electric generation assets to the benefit of the local economy and Mexican consumers.

Despite some of his more extreme rhetoric during the 2018 campaign, AMLO assumed a moderate posture towards the energy industry and its many international investors early in his presidency, possibly influenced by then-U.S. President Donald Trump. But in 2021, with the advent of a U.S. administration overtly hostile to the U.S. domestic industry, AMLO has begun taking measures to centralize government control over energy, most recently with the proposal of a series of constitutional measures that would reassert state control of the electricity market.

If enacted, these new reforms will reverse previous national commitments to an independently regulated, market-based system that encouraged investment and the benefits Mexico can achieve through them. They will banish private investment in electricity, reserve future control of lithium extraction to the state, and even eliminate two key energy regulatory bodies – the National Hydrocarbons Commission (CNH) and the Energy Regulatory Commission (CRE) – consolidating their functions under the Energy Ministry and the State-owned power company Comisión Federal de Electricidad (CFE), while giving much more leeway to PEMEX.

For the Mexican people, AMLO’s steady reassertion of state control of the nation’s energy sector provides yet another sad lesson in the perils for private companies making major investments in the country and will predictably lead to higher energy costs for Mexicans and across several North American value chains. It is a lesson that will make any efforts by future presidents to attract new international investment into the country all the more difficult to achieve.

Click here to read the complete original editorial by David Blackmon on Forbes