Electricity Reform would Cenerate Controversies for T-MEC: BBVA and Banorte

The electrical reform is opposed to chapters of the T-MEC; in addition, it requires qualified majorities in Congress, BBVA and Banorte indicated.

Financial institutions have joined the analysis of the impact of the electricity reform proposed by President Andrés Manuel López Obrador and highlight the controversies that it would generate in the framework of the T-MEC, as well as the challenges that the government faces for the approval of the initiative by requiring qualified majorities in Congress.

BBVA’s area of analysis points out that the counter-reform favors the CFE from the regulatory framework to the detriment of the rest of the competitors, many formed from foreign investment from commercial counterparts within the Agreement between Mexico, the United States and Canada (T- MEC) and other commercial agreements.

In that sense, he refers that as far as the T-MEC is concerned, the Executive’s initiative is opposed to chapters 14 (Investment) and 21 (Competition Policy), “at least”, says BBVA.

Regarding chapter 14, it indicates that, for example, article 14.4 establishes that each party will give no less favorable treatment to investors than the rest of the parties, which is granted to its own investors with respect to the establishment, acquisition, expansion, operation, sale, or other investment dispositions.

“In a similar sense, Article 14.5 indicates that each party, that is, each of the countries that signed the T-MEC, will grant a treatment no less favorable to the investors of the rest of the signatories of the treaty, than the one that grants to domestic investors, regardless of whether or not they are government companies, such as the CFE, ”explains the financial institution.

Meanwhile, article 14.10 prevents any of the parties from imposing conditions, requirements, commitments or obligations to acquire, use or give preference to a locally supplied service; as well as not restricting sales of a service given by the investments made; “Which could be the case of favoring the CFE since many applicants of this service would be obliged to only receive the service of this company.”

In relation to chapter 21, in this it is committed that the parties ensure that competition policies treat the people of any of their counterparts no less favorably.

Qualified Majority Required
Banorte, in turn, foresees that given the need for constitutional changes, the electricity reform could face challenges for its approval.

“We must remember that for this type of initiative to be approved, a qualified majority (2/3 of the total number of legislators) is required in both Chambers of the Congress of the Union, as well as more than 50% of the local legislatures”, highlights the Banorte’s economic analysis.

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In this context, Morena (the president’s party) and his allies in this year’s elections (PT and PVEM) control 277 seats in the Chamber of Deputies. Therefore, they would need at least 57 more legislators from other parties.

In the Senate, assuming this coalition was joined by the four senators from the PES, they would have 78 seats, resulting in 8 fewer legislators than necessary.

“As for the local Congresses, Morena and his coalitions do have control in the majority required, so it would probably not be a challenge for their approval,” he explains.

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Electricity Reform would Cenerate Controversies for T-MEC: BBVA and Banorte - /10

Summary

The electrical reform is opposed to chapters of the T-MEC; in addition, it requires qualified majorities in Congress, BBVA and Banorte indicated.

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