The Mexican Justice gives the green light to López Obrador's electricity law against companies such as Repsol and Iberdrola

The Supreme Court of Justice of Mexico has concluded that the modifications that the government has introduced in the Electricity Industry Law (LIE) are in accordance with the law.

The ruling of the highest court represents an important legal victory for President Andrés Manuel López Obrador, who seeks to bury the liberalizing policies of his predecessors to bet on

.

Despite the fact that ordinary justice and international courts may continue to hinder the change of regulations, the Supreme Court's resolution offers the Government a solid legal guarantee to impose its ambitious energy project.

As expected, the vote cast yesterday was tight.

The day before, the Mexican president took it upon himself to put pressure on the magistrates: "Don't let them come to me with that story that the law is the law. No, what is going to be shown is whether they are public interest lawyers or employer lawyers.

Finally, most of them were in favor of declaring the Executive's modifications unconstitutional, but the eight votes necessary to achieve it were not reached.

Responsibility for the result has fallen on four judges, including the President of the Court and two positions appointed by the Government, who have voted against it under the premise that "it does not violate free competition and market competition."

One of the most controversial points of the LIE reform is that it put an end to the principle of the economic dispatch promoted by former President Peña Nieto, by which the cheapest plants, mostly renewable in the hands of the private sector, were the first to upload electricity to the grid.

The new legislation is committed to giving

, regardless of their way of producing energy, which, for the most part, comes from extremely polluting fuel plants.

Nuclear power plants, geothermal plants, CFE combined cycle plants, Independent Power Producers would enter a second level of distribution and, finally, it would be the turn of privately owned wind, solar and combined cycle plants.

Among the modifications proposed by AMLO, the door is also opened to

, which until now allowed maintaining a very competitive market.

The Federal Economic Competition Commission, an autonomous regulatory body, has denounced on several occasions that these policies are going to turn the sector into a state monopoly, vertically integrated and without regulation: "It would affect Mexican consumers and companies due to more expensive electricity rates, it could also hurt public finances due to the inefficient use of resources and the application of subsidies".

The reform of the LIE has had to overcome numerous obstacles to get this far.

In March 2021, the ruling party Morena used its majority in the Chambers to approve the new electricity law in record time, but, 24 hours later, a judge annulled it after accepting the injunctions presented by several affected companies.

The complaints continued to arrive and, three months later, the ruling party lost control of the Chamber of Deputies in the mid-term elections.

This fact is particularly relevant in this context.

The modifications to the LIE are just the

that allows him to regulate the sector with more freedom.

"It is understandable that those who lived with privileges in the old regime do not like the fact that a transformation is carried out. They do not like that corruption be eradicated, that corruption be banished from the country," the Mexican president recently assured to defend his proposal to modify three constitutional articles and nine transitory ones.

The reform establishes that

and that the private ones will have to distribute the rest.

In addition, it eliminates other regulatory bodies to hand over its powers to the Secretary of Energy and nationalizes the exploitation of lithium as it is considered a "strategic area".

Next week the initiative reaches the Chamber of Deputies destined to die, since Morena has lost the qualified majority and her rivals have closed the door to support her.

Spain, as an example of what needs to be changed

The president has used the Spanish companies that operate in the country as an example of the worst practices of

: "They did what they wanted, they abused our country and our people, they saw us as a land of conquest, to the extent that in each six-year period there was a favorite company in Spain, Iberdrola was treated with privileges that affected us".

AMLO has also recently alluded to the rise in electricity prices in our country to describe the scenario that he intends to avoid with his reform: "I hope that it will spread who is in favor of foreign companies or in favor of the people, because if it is not approved the reform is going to be the companies that are going to fix the prices and

".

Spain is the second foreign investor in Mexico, only behind the US, and the energy sector is one of the most important.

Companies such as

, many of which took advantage of the opening promoted by Peña Nieto to settle in the country.

In that period, between 2014 and 2018, Spanish companies accounted for half of foreign direct investment in electricity generation and transmission.

Another of the most affected countries is going to be the USA;

According to his calculations, his companies will lose more than 10,000 million dollars due to the legislative changes.

BBVA Mexico goes further and puts at least 40,000 million dollars the investments that are put at risk.

"It would make the investments made by these companies obsolete. This, in economic terms, would be comparable to an expropriation," assured the entity's chief economist, Carlos Serrano.

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