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Mexico’s proposed energy reform could have broader consequences for democracy at large

A Supreme Court decision on the reform expected Thursday could reveal whether or not President López Obrador is exerting undue influence over the judiciary.

MEXICO CITY (CN) — A case in Mexico’s Supreme Court concerning the president’s proposed electricity reform could have implications reaching much farther than the country’s energy sector: democracy at large.

While the case concerns President Andrés Manuel López Obrador’s attempt to undo energy reforms from previous decades, the ruling could reveal how much influence Mexico’s executive branch now wields over the judiciary.

Initially proposed as two separate administrative regulatory policies in 2020 that the court deemed unconstitutional in February 2021, the reform is a combination of the two policies created by López Obrador, who said he did so without changing “even a comma" of the previous proposals.

Among other changes, the reform aims to give the country’s Federal Electricity Commission (CFE) first rights to all energy purchases, a move experts say will stifle competition and put billions of dollars of foreign investment at risk.

The court started hearing the case Tuesday.

One of the issues up for debate was whether or not access to electricity is a human right that the state is obligated to provide. Six of the ministers said they did not agree that the issue is before the court and moved on to debate other aspects of the reform.

“The CFE wants to go to the front of the line and try to do in the legislature or the court what it couldn’t do in economic terms,” said Gonzalo Monroy, managing director at the Mexican energy consultancy GMEC. 

But the deeper issue behind the case is the question of the Supreme Court’s independence from the political reach of the executive branch, he said. 

López Obrador appointed four of the court’s 11 ministers.

His most recent appointee, Loretta Ortiz Ahlf, is a former congresswoman and founding member of the president’s Morena party. Before that, she flew the flag of the Worker’s Party, now allied with Morena along with the Green Party and others.

Members of opposition parties in the Senate called for her recusal from the case in March, but Ortiz did not comply.

Ortiz indicated Tuesday that she supports the reform.

While they haven’t all invariably ruled in favor of issues championed by López Obrador, those four appointees could be enough to block a finding that the reform is unconstitutional. At least eight ministers must vote against the reform to deem it unconstitutional.

Going against the precedent set in February 2021 would represent the undue influence of one branch of government over the judiciary, Monroy said.

The reform bill is just one of several ways López Obrador has tried to centralize the power of the country’s energy sector. Also in the works is a constitutional amendment for electricity reform, on which Congress will vote later this month. In December, he announced his intention to end all oil exports by 2023. 

Monroy said that after López Obrador’s initial attempt to reform the state oil company Pemex failed early in his presidency, leaving the company further in debt than before, the president is opting for “second best” with this latest reform. 

“He’s not going to be the new Lázaro Cárdenas,” Monroy said, referring to the president who created Petroleos Mexicanos (Pemex) in 1938. “So he went for second best, which is trying to be the new President López Mateos, who nationalized the electricity industry in 1960.”

In addition to its possible violation of Mexico’s constitution, the electricity reform appears poised to violate the terms of the United States-Mexico-Canada Agreement (USMCA), the free trade treaty that replaced the North American Free Trade Agreement in July 2020. 

The USMCA places constraints on what a country can do in increasing internal costs. By making the CFE the sole purchaser of electricity in the country, the reform aims to give it the power to set its prices, possibly higher than they currently are.

“López Obrador’s efforts are directed toward doing exactly that,” said Eric Smith, associate director of the Tulane Energy Institute. 

This would directly affect the United States in terms of natural gas exports. The U.S. currently exports around the same amount of liquid natural gas to Mexico as it does to Europe. The reform could mean fewer U.S. jobs in the natural gas industry, Smith said.

Two ministers expressed their opinions that the main reforms to the electricity law are unconstitutional before the court adjourned Tuesday without issuing a decision. It will take up the matter again when it reconvenes on Thursday.

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