Pedro Niembro

The energy reform, approved by the Mexican Chamber of Deputies on October 9 and by the Senate on October 17, has now been ratified by local congresses, signed into law by President Sheinbaum, and published in the Official Gazette. The reform modifies Articles 25, 27, and 28 of the Mexican Constitution and has potential implications for trade and investment in addition to the energy sector. The reform reclassifies state-owned productive enterprises (CFE and PEMEX), stripping them of operational independence and designating them as public enterprises, which will now receive full state financial support and operate as monopolies, focusing on social nationalism rather than profitability. Article 27 restricts private participation in the electricity sector, reinforcing the government's commitment to maintaining control over electricity services and ensuring affordable access. Article 28 clarifies that the state’s functions in strategic areas, including lithium exploitation and internet services, do not constitute monopolies, while also prioritizing energy security and self-sufficiency. The implications for businesses are significant, as the reform may deter private investment and create legal uncertainties that could hinder energy transition efforts. The Mexican Institute for Competitiveness (IMCO) warns that these changes could lead to increased energy costs and lower service quality, echoing concerns about monopolistic structures. The ambiguity surrounding the reforms complicates predictions regarding their impact on the electricity market and may provoke international legal challenges under agreements like the USMCA and TPP, jeopardizing $33 billion in U.S. and Canadian energy investments. President Sheinbaum's ambitious target of achieving 40% renewable energy by 2030 is undermined by these amendments, raising questions about the administration's ability to reconcile nationalistic pressures within her party while attracting necessary investment to fulfill climate commitments. With President Sheinbaum's electricity strategy scheduled for announcement on November 6, followed by her plan for the oil and gas sector on November 13, a clearer outlook for Mexico's energy sector may soon emerge. As of now, however, the reform’s ambiguous terms and centralized approach have created substantial uncertainty among potential investors, casting doubt on Mexico's ability to attract private capital while maintaining affordable, sustainable energy for its population.

Monarch Senior Director Pedro Niembro spoke to the Latin America Advisor: Energy Advisor about the need for drastic operational changes at Pemex and the different approaches the two leading candidates to be the next president of Mexico are likely to take to address the firm's existential threats.

Monarch Senior Director Pedro Niembro expressed in the Latin America Advisor: Energy Advisor his positive view of the Mexican government's purchase of 13 power plants from Iberdrola, which could relieve the permitting bottlenecks blocking renewable energy projects in Mexico and enhance the country's effort to attract investment from nearshoring.