The Road to Mexico’s Self-Sufficient Energy Reforms

17 November 2021
Dr. Jeff D. Makholm, Dr. José Antonio Peñuelas, and Hamish Fraser

For the last 25 years, Mexico has worked to reorganize and modernize the structure and regulation of its gas and electricity state-owned monopolies, opening the Mexican energy market to private and foreign investment. In March 2021, Mexican President Andrés Manuel López Obrador proposed major reform programs, campaigning on Mexican self-sufficiency. These proposed reforms would essentially dismantle the past 25 years of improvements and many successes. In two new papers, NERA Managing Director Dr. Jeff D. Makholm, Senior Economist Dr. José Antonio Peñuelas, along with Hamish Fraser provide a macro and micro review of the current energy infrastructure landscape in Mexico, analyzing President López Obrador’s proposed plan of self-sufficiency.

In “Mexico’s Singular Retreat from Energy Markets,” Dr. Makholm discusses Mexico’s limited options for gas production and electricity generation, unique geographic position in Latin America, and country risk. Dr. Makholm notes that it is difficult to see how President López Obrador’s plan of self-sufficiency actions can succeed without harming both the efficient provision of energy services to Mexico’s industrializing economy and the reasonably expected returns of those invited to participate in Mexican energy projects after 2013.

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Mexico's Singular Retreat from Energy Market's


La Singular Retirada de México de los Mercados Energéticos

In “Re-Nationalizing Mexico’s ‘Best Practices’ Competitive Electricity Market,” Dr. Makholm, Dr. Peñuelas, and Mr. Fraser describe the inherited state of Mexico’s electricity sector and the need for greater electrification of Mexico’s growing economy, while giving a brief history of the electricity market in Mexico, including NERA’s in-depth participation in it. The authors explain the trajectory of the country’s electricity policy since President López Obrador took office and the resulting legal challenges and other negative consequences for new projects and investments, and ultimately the October 2021 proposed Constitution reforms.

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Re-Nationalizing Mexico’s “Best-Practices” Competitive Electricity Market

 

Re-Nacionalización de las “Mejores Prácticas” del Mercado Eléctrico en México

NERA’s first-hand, 25-year history participating in Mexico’s energy sector’s modernization, combined with the firm’s longer experience working with dozens of new electricity and gas markets worldwide, gives weight to these brief macro and micro reviews of Mexico’s current energy market problems.