AMLO’s electricity proposal “negative” for sovereign rating – Moody’s

(Photo by El Universal)

MEXICO CITY, October 07, 2021, (Reuters) – The Mexican president’s proposal to reform the country’s electricity sector is “negative” for the sovereign credit rating of Latin America’s second-largest economy, Moody’s Investors Service said this Wednesday.

The ratings agency warned in a statement the bill would likely trigger international legal disputes, affect foreign investment competitiveness as well as take the country further away from reaching its climate goals.

Moody’s said the initiative “is credit negative for the Mexican electricity sector because it would lessen its operating transparency, deter private investment in generation, disincentivize renewable generation and likely increase the overall cost of electricity.”

Mexico’s sovereign credit rating is currently at Baa1 with a negative outlook.

Recently sent to Congress, the bill foresees the state expanding its role in oversight of the sector at the expense of regulators and will set limits on private sector involvement.

Federal Electricity Comission (CFE), the country’s state electricity company, would supply 54% of the market and the Mexican government would also be the dominant player in the lithium industry and “other strategic minerals”. 

The reform announced by President Andres Manuel Lopez Obrador foresees giving the Comision Federal de Electricidad (CFE) over half of the power market and putting it in charge of setting terms for private generators.

Source: Reuters