OECD calls for Mexican Energy Regulatory Integration

The Organization for Economic Cooperation and Development (OECD) recommended the creation of a group to exchange information and facilitate procedures within the Mexican energy sector. The recommendation was made to the National Hydrocarbons Commission (CNH), the Energy Regulatory Commission (CRE) and the Agency for Safety, Energy and the Environment (ASEA).

“Those are institutions whose independence has to be strengthened, and they have to keep their course regardless of political cycles,” said OECD Cabinet Director, Gabriela Ramos.

She added that the implementation of this mechanism has been well received by other energy regulators in the world, and stressed that the importance of these initiatives is to encourage confidence and investments in the market.

OECD called to rethink ASEA’s structure, which unlike other entities, depends on the Ministry of Environment and Natural Resources (Semarnat), and requires greater independence to develop its functions and be able to communicate and coordinate with other regulators.

Bottom-line: It is not hard to read between the lines and see deep concern about Andrés Manuel López Obrador’s rising position in the opinion polls. One headline we saw recently even said AMLO had ‘one foot in Los Pinos’ (as the Mexican presidential palace is known.

That seems exaggerated considering that the elections are not until next July 1st. It does reflect the fact that no strong candidate has emerged from the center to oppose him.

If he does what he says he will, many of the reforms of the last several presidents could be undone and, in the worst case, Mexico could return to its former incarnation as a centralized, closed and likely poorer economy.

In particular, he has said he would ‘review’ Energy Reform, especially the contracts already signed with private companies. That would definitely put a chill on private investment.

Hence the OECD’s suggestion that the implementing structures of Energy Reform like the CNH, the CRE and the ASEA, strengthen their independence and interdependence. This cannot hurt (the golden rule of bureaucratic organization development should be ‘First, do no harm’) but might not be enough to prevent an AMLO ‘review’ turning into a ‘reversion’.

Tags: energy, hydrocarbons, latam, mexican energy sector, mexico, oecd
Posted in LatAm, Energy, Energy