Mexican Presidential Hopeful Would Further Tighten Control of Electricity Sector

The mayor of Mexico City outlined her plan to strengthen ailing electricity utility CFE during an interview with Bloomberg

Mexico City Mayor Claudia Sheinbaum, who has expressed her intention to run for president in 2024, during an interview at City Hall on Dec. 28, 2022.
By Nacha Cattan and Maya Averbuch
January 05, 2023 | 11:38 AM

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Bloomberg — Mexico’s leading presidential hopeful Claudia Sheinbaum, who is currently the mayor of Mexico City, wants to accomplish what even her mentor, President Andrés Manuel López Obrador, wasn’t able to: a constitutional change that would cement state control over the power sector and favor state utility CFE.

Sheinbaum sees herself as the natural successor to López Obrador, whose term ends in December 2024.

The mayor of Mexico City outlined her plan to strengthen the ailing electricity utility owned by the state during an interview with Bloomberg in late December. The issue gained renewed urgency, she said, after the energy crisis seen in Europe, “where too much privatization has generated a diverse set of problems.”

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“A state electricity industry strengthens the electric system, and at the same time the private sector can participate,” limited to a 46% share of the market, Sheinbaum said at City Hall.

“If we manage to have a balance, based on clear agreements, then the system can grow in the future to meet all the needs of the country and strengthen renewable sources of energy.”

AMLO, as the Mexican president is known, has tried to restore state control over the energy sector, but has faced stiff opposition from lawmakers who say his plan would harm competition and hinder Mexico’s ability to meet environmental commitments.

One of AMLO’s electricity bills was blocked in congress, and another was approved but remains caught up in court cases. He has still managed to boost the state’s dominance of the sector through changes to regulation and negotiation of permits.

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But Sheinbaum promised that, if elected president in June 2024 with a strong congressional base, she would seek to amend the constitution to ensure that the Comision Federal de Electricidad controls at least 54% of the electricity market — AMLO’s stated goal.

The CFE has said it generates about half of Mexico’s electricity, and López Obrador worries it could quickly lose market share if its preponderance over private companies isn’t guaranteed in the constitution.

“It’s necessary to strengthen CFE and be clear about what kinds of private investments are allowed,” Sheinbam said.

By giving preference to the state-owned power generator, Mexico puts at risk investments in renewable energy projects from foreign companies including Spain’s Iberdrola SA and Acciona Energia SA, as well as France’s EDF and Engie SA.

To be sure, there’s no guarantee that López Obrador’s successor, if elected, would have a larger congressional support than he currently has.

Sheinbaum is polling far ahead of any potential candidate from opposition parties, but only slightly ahead of other names the president has cited as his potential torch bearers. And while the mayor is seen by people close to the president as his top pick, AMLO himself has denied having made a choice. It’s up to the ruling Morena party to decide its candidate through a survey this year.

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Green initiatives

The mayor’s opinions on energy and the economy hew closely to those of AMLO, but at the same time she expresses more interest in environmental projects and a future transition out of fossil fuel.

An environmental engineer by trade, Sheinbaum, 60, said she’d like to bring her climate-friendly projects from the city, such as electrifying part of the public transportation system, to a national scale. She wants to boost public investment in research and development for green initiatives. While her climate focus would represent a shift from AMLO, critics of the current administration have long said that giving preference to CFE, which has aging hydroelectric infrastructure and slow-growing solar projects, would discourage private green investments.

She also avoided saying whether she would raise taxes, something AMLO has vowed never to do. That topic, she said, needs to be discussed with business leaders so that it isn’t a “topic of conflict but rather consensus.”

On most other matters, however, Sheinbaum’s and AMLO’s views are in sync.

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She would respect the central bank’s autonomy, but concurs with the president that the board should pay more attention to economic growth and not just inflation. In the same vein, she wants public policy to focus less on expanding gross domestic product and more on boosting development and well-being.

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She would substantially raise the minimum wage each year, as the president has done, and has promised to continue the current administration’s fiscal austerity.

The mayor declined to say how her administration would significantly differ from AMLO’s, arguing that it’s not the time for her to be making such distinctions since the president still has almost two years left in office.

Sheinbaum served as the capital’s environment minister when AMLO became mayor in 2000, and later headed the city’s populous Tlalpan district. She thinks she’s well positioned to become Mexico’s next president because it’s time for a female leader to take on the job.

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“There are people who want a female president and our movement is doing well in the polls,” she said. “So there’s a really good chance this will happen.”

--With assistance from Amy Stillman.

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