(The following is an excerpt from the introduction o forthcoming
TransBorder Policy Report.)
The national electricity
system in Mexico is undergoing a radical overhaul. Proponents assert that the
reform will ensure a more fiscally and environmentally sustainable system.
The market-oriented reform enjoys
widespread support because of the embarrassing dysfunction of the government-owned
grid. Electricity prices, losses because of faulty infrastructure, losses from
theft, and annual budget deficits make Mexico’s electricity system one of the
most expensive and least efficient in the developed world.
Political and populist
pressures have created a clunky system burdened by exorbitant subsidies. What
is more, electricity generation has long been dependent on especially dirty
fuels, notably low-quality coal and oil.
The future of electricity
generation, transmission, and service is uncertain as the government opens up
all facets of the electricity system to private companies, including foreign
corporations such as General Electric.
The reform of Mexico’s
national electricity system has been the subject of little public attention,
political dispute, or congressional debate. Rather than being introduced as a
separate bill, the Peña Nieto administration folded the proposed liberalization
of the electricity system into the national energy reform bill, which became
law in December 2013.
The contentious debate over
the highly controversial energy reform focused on Mexico’s oil sector, which
since the late 1930s has been managed by the state-owned Petróleos Mexicanos
(PEMEX). The nationalization of foreign oil companies by President Cuauhtémoc
Cárdenas and the subsequent creation of PEMEX were among the most heralded
accomplishments of the post-revolutionary regime controlled by PRI political
party.
The PRI controlled Mexico for
seven decades, losing the presidency to the National Action Party (PAN) in
2000. In December 2012, the PRI -- with Enrique Peña Nieto as its presidential
candidate -- reassumed its position as ruling party after two sexenios (6-year terms) by PAN
presidents. Although traditionally opposed to the privatization and free market
ideas advocated by the conservative PAN, the PRI since the 1980s has
increasingly advocated the liberalization of the Mexican economy through free
trade agreements and the transfer of state-owned corporations to private
investors.
President Peña Nieto’s
proposed liberalization of the national energy system counted on near-total
support of the nation’s two largest political parties, namely PRI and PAN. As
expected, the reform – which for the first time substantially opened the
industry to private (including foreign firms) investment and control –
encountered strong opposition from the left parties, principally PRD and the
newly constituted MORENA, as well as from the powerful and shamelessly corrupt
PEMEX workers’ union STPRM.
The government of President
Enrique Peña Nieto promises that the liberalization of Mexico’s national
electricity system will increase efficiency and lower prices. But the sordid history
of the liberalization of other previously state-owned sectors –most notoriously
banking, mining, communications, and railways in the 1980s and 1990s – justifies
some skepticism.