Mexican president sees 'treason' behind power bill defeat, businesses relieved

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MEXICO CITY, April 18 (Reuters) - Mexico's president on Monday excoriated opposition lawmakers for voting down a major electricity reform, though business groups were cheered by Sunday's vote, which lifted some of the investor uncertainty clouding the country's energy market.

President Andres Manuel Lopez Obrador decried the defeat of his bid to change the constitution to tighten state control of the power market as "treason," though it could lower the risk of Mexico becoming embroiled in costly trade disputes.

Although the law's defeat offered a measure of relief to investors, considerable uncertainty remains for businesses that have been unsettled by a raft of efforts by Lopez Obrador to reinforce state domination of the industry.

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The leftist leader had spent months championing the bill he said would protect consumers and make Mexico more self-sufficient. Opponents argued it would raise electricity costs and undermine the country's clean energy commitments.

The opposition united to reject the bill, and Lopez Obrador's National Regeneration Movement and its allies in the lower house of Congress fell well short of the two-thirds majority needed for constitutional amendments. read more

"I believe that yesterday was an act of treason against Mexico committed by a group of legislators who, instead of defending the interests of the people ... became outright defenders of foreign companies," Lopez Obrador said, speaking at a regular news conference.

The legislation would have prioritized state power utility Comision Federal de Electricidad (CFE) over private operators. Business lobbies and Mexico's top trade partner the United States had warned it could violate a North American trade agreement.

Neil Herrington, senior vice president for the Americas at the U.S. Chamber of Commerce, said the bill's defeat was ultimately in Mexico's best interest.

"Lawmakers realized that the proposal, as submitted, would have severely undermined the country's business climate at a time when foreign investment is needed more than ever to generate jobs and growth," he said in a statement.

Mexico's Business Coordinating Council (CCE) applauded lawmakers for showing "great responsibility."

Lopez Obrador submitted the bill last autumn after courts blocked a series of legislative measures and decrees aimed at bolstering the CFE, which relies heavily on fossil fuels from cash-strapped state oil company Petroleos Mexicanos (Pemex).

He argues previous governments rigged the market in favor of private companies, many of whom have yet to resolve their disputes with his administration, whose strategy has had the practical effect of increasing state control.

Mexico would probably continue to use regulatory and legal means to stymie the private sector, a Mexico-based diplomat said, pointing to Lopez Obrador's rhetoric.

The president said he would not revisit the bill, but added he hoped whoever emerged as a candidate from his party to succeed him in 2024 would try something similar.

He urged lawmakers to pass a separate bill he wants debated on Monday to nationalize Mexico's lithium reserves.

Under the lithium bill, Mexico would reserve the sole right to exploit the metal via a state-run company, and would not grant any concessions, the president said. Mexico does not have any commercial production of lithium.

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Reporting by Dave Graham, Kylie Madry and Valentine Hilaire in Mexico City Editing by Hugh Lawson and Matthew Lewis

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