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A Big Win for Markets in Mexico – WSJ Editorial

The country’s high court rules that AMLO’s electricity law is illegal. (semiconductors.org)
The country’s high court rules that AMLO’s electricity law is illegal. (semiconductors.org)

By WSJ Editorial Board

Americans haven’t paid much attention, but President Andrés Manuel López Obrador (aka AMLO) has tried during his five-year rule to reverse Mexico’s landmark economic reforms of the previous 30 years. He suffered his biggest setback this week when Mexico’s Supreme Court struck down much of his electricity legislation for violating the constitution.

A 2013 amendment to the constitution opened Mexico’s oil, gas and electricity markets to competition and private investment, both foreign and domestic. It was a monumental change for an economy too long dominated by state-owned or -sanctioned monopolies. Investors in solar, wind and natural gas were among the new entrants eager to become electricity suppliers in Mexico.

Mexican President Andrés Manuel López Obrador  (Sashenka Gutierrez/Shutterstock)
Mexican President Andrés Manuel López Obrador (Sashenka Gutierrez/Shutterstock)

But in 2021 Mr. López Obrador and his Morena party in Congress rewrote the Electric Industry Law, giving priority to the state-owned federal electricity company in power generation and sale. Given the company’s inefficiency and its use of dirty fuel from the state-owned oil company Pemex, the changes are bad for the economy and environment.

Investors sued and won injunctions, and now the high court’s administrative division has voted 3-2 to overturn the part of the law that denies a level playing field in the electricity market. The state-owned company will have to compete in bidding with private competitors under rules that were established a decade ago.

The court’s decision is a victory for the rule of law in Mexico and the North American energy market. Abundant, cheap energy is a comparative advantage in North America that can drive investment in manufacturing, and integrating the energy market across Mexico, the U.S. and Canada will help lure production from around the world.

To return Mexico’s energy market to state control, Mr. López Obrador will now need to amend the constitution, which requires two-thirds majorities in both legislative chambers. Discrimination against investors in that way would violate the U.S.-Mexico-Canada Agreement on trade and investment rules, allowing U.S. retaliation. Mexico is struggling under the lawless violence of drug cartels, but its Supreme Court has saved the country from a destructive economic turn.

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WSJ Editorials are written by The Wall Street Journal (WSJ) Editorial Board. The Board speak for free markets and free people, the principles, if you will, marked in the watershed year of 1776 by Thomas Jefferson’s Declaration of Independence and Adam Smith’s “Wealth of Nations.” So over the past century and into the next, the Journal stands for free trade and sound money; against confiscatory taxation and the ukases of kings and other collectivists; and for individual autonomy against dictators, bullies and even the tempers of momentary majorities.  Energiesnet.com does not necessarily share these views.

Editor’s Note: This article was originally published by The Wall Street Journal (WSJ), on July 24, 2023. EnergiesNet.com do not reflect either for or against the opinion expressed in the comment as an endorsement of Petroleumworld or EnergiesNet.com

Original article

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EnergiesNet.com 02 04 2024

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