Mexico president threatens constitutional change if power bill struck down

MEXICO CITY (Reuters) - Mexican President Andres Manuel Lopez Obrador said on Wednesday he would send an initiative to Congress to reform the constitution if a new law to increase state influence over the electricity market is deemed unconstitutional.

FILE PHOTO: Mexico's President Andres Manuel Lopez Obrador gestures during a news conference at the National Palace, in Mexico City, Mexico February 23, 2021. REUTERS/Henry Romero/

Last week, a judge temporarily suspended the government’s electricity bill, which was passed by lawmakers this month to strengthen state power utility the Comision Federal de Electricidad at the expense of private operators.

The law has angered business groups and generators of wind and solar power, whose projects have been held up by the government as it attempts to reorganize the market.

Speaking at a regular news conference, Lopez Obrador said he was sure the legislation was not unconstitutional.

“But if judges, magistrates, justices determine that it is unconstitutional and that it can’t continue, I would send a initiative to reform the constitution,” he said.

He did not detail what such a change could look like.

Some lawyers familiar with the energy sector do not believe the law is likely to be declared unconstitutional if the government can provide adequate guarantees to existing investments.

Still, the power market shake-up has soured the mood for some investors, and providers of renewable energy are concerned that the changes threaten their businesses in Mexico.

Lopez Obrador argues the previous administration skewed the electricity market in favor of private operators with its own constitutional overhaul. Earlier this month, the leftist leader said he would renegotiate existing contracts in the industry.

Some companies were eager to reach a deal with the government, Lopez Obrador said, without naming any. However, there would need to be “discounts,” he said.

Trade experts say that a repeal of the last government’s energy reform could breach Mexico’s commitments to investors under a regional trade deal it initially sealed in 2018, the United States-Mexico-Canada Agreement (USMCA).

Reporting by Dave Graham; editing by Jonathan Oatis and Bernadette Baum