Leer en Español
The curse of Mexican oil is a spell of statism, bureaucracy, mafias and inefficiency, which turned one of the most valuable natural resources into a bottomless barrel of corruption operated through PEMEX, the most indebted oil company in the world, which for decades fed the ambitions and whims of politicians and unions, at the cost of turning what could and should have been a competitive sector into a bureaucratic wasteland.
Well, now AMLO wants to repeat that same curse with lithium. Let’s see:
On Friday, October 1, Mexico’s President Andres Manuel Lopez Obrador announced that he has presented his long-awaited initiative to reform the national Constitution on energy matters, with the aim of reversing the progress made in that sector during the Peña Nieto administration.
In a nutshell, the proposal involves repositioning another government company, the Federal Electricity Commission (CFE), as owner and mistress of the electricity sector, adding a paragraph to Article 28 of the Constitution so that it will be recognized as “a State agency” that “is responsible for electricity and the National Electric System, as well as its planning and control.”
In addition, the CFE will absorb the functions of the Energy Regulatory Commission, the National Hydrocarbons Commission and the National Energy Control Center, and will be granted by law the majority participation in the market, by establishing that it must produce “at least 54% of the energy required by the country”, while the private sector will be able to aspire to a maximum of 46%.
Even this minority participation of private companies is in serious doubt, because the reform also proposes the cancellation of both electricity generation permits and electricity purchase and sale contracts with the private sector, as well as Clean Energy Certificates. In other words, everyone is back to square one, but now with all the advantages (even more) for the CFE.
To end quickly, the initiative basically implies the same thing that AMLO seeks in all his policies: that the companies in the electricity sector throw themselves at the president’s feet, begging for mercy. Those who López Obrador covers with his mantle will be able to survive in the market; the rest will be left out.
Mexico’s oil curse, now with lithium
The initiative in general is a gallery of horrors, built from a retrograde and centralist vision, deeply authoritarian and outrageously capricious. However, there is something particularly tragic in it: AMLO intends to repeat with lithium the curse of Mexican oil.
Lithium is a mineral that many consider to be “the oil of the 21st century” due to its usefulness as a raw material for electric car batteries, among other industrial applications; and Mexico has some of the world’s largest potential lithium deposits.
Well, López Obrador intends for this wealth to be monopolized by the Mexican Government in a similar way as politicians appropriated the oil sector during the 20th century. The reform initiative contemplates modifying the aforementioned article 28 of the Constitution, to include lithium among those supposed “strategic areas” where “the functions that the state exercises exclusively shall not constitute monopolies.”
In a modification to article 27 of the Constitution, the reform itself proposes to specify that concessions will not be issued for private companies to extract lithium, although one of the transitory articles leaves the door open for existing concessions (some 8 throughout the country) not to be eliminated, as long as “to date there is a history of lithium exploration duly endorsed by the Ministry of Economy.”
Why is this so serious?
Because the approval of this reform would imply that lithium, one of the raw materials with the greatest economic potential for the future, would follow the same route that during the 20th century Mexico defined for the railroads and oil, two sectors that in the hands of the government became not “property of the nation” (that does not exist) but the property and whim of union and political mafias, who swelled with money, while Ferrocarriles Nacionales and PEMEX sank into absurd levels of corruption and inefficiency.
The railroad sector was finally privatized at the end of the last century, but has yet to make up for lost time. And oil? PEMEX is a walking corpse, whose finances are collapsed beyond hope; the oil company’s bonds are considered “junk” internationally, and its debts threaten to drag down the credit rating…and finances, of the entire country.
But money for “leaders” and politicians has not been lacking. The oil union is infamous for the stories of waste and corruption committed by its leaders, including Ferrari collector’s cars, arms stockpiling and “a castle in France” to mention a few.
The worst part of the case is that this rot has spread to all of PEMEX and to the places where the state-owned company has settled with its wells and refineries. Whether in Guanajuato, Veracruz, Campeche or Tamaulipas, lazy “millionaires”, unproductive workers and political mafias multiplied. Corruption became a habit and pollution became a destiny, both in the air and in coexistence.
And that route. That curse of Mexican oil is what AMLO wants to repeat now with lithium: to form a new government company, perhaps LITIOMEX, with a new syndicate, new national and local mafias and new castes of privileged loyal to the new regime, but at the expense of the whole country.
The opposition can stop the reform, but will it?
Since it is a reform to the national Constitution, the President’s initiative requires the support of two thirds of the Chamber of Deputies and the Chamber of Senators, as well as the support of more than half of the local congresses. The vote in favor of the state congresses is guaranteed, since the ruling party has a majority in 20 of the 32 local parliaments. The problem is at the federal level.
Theoretically, López Obrador does not have the necessary votes in the chambers to approve his reform. He needs the support of 333 deputies and 85 senators, but the ruling party only has 275 deputies and 74 senators, so the opposition should have no difficulty in stopping this whim of the Mexican president.
The problem? The PRI is flirting with treason.
Since Friday, both the PAN, the PRD and Movimiento Ciudadano have said they are against this counter-reform, but the PRI (PAN and PRD’s partner in Va por México) did not condemn it, but rather went off on a tangent, stating that they will “analyze it in forums”, in a new sign that the party is getting closer to AMLO and could support his agenda.
If at the end of the day the PRI betrays the opposition and joins the ruling party, AMLO would have the vote in favor of 346 deputies and 87 senators, enough to approve the reform, destroy the electricity industry market and repeat with lithium the curse of Mexican oil, a spell that translates into poverty for the people, power for the politician and money for the union. Again.
Gerardo Garibay Camarena, is a doctor of law, writer and political analyst with experience in the public and private sectors. His new book is "How to Play Chess Without Craps: A Guide to Reading Politics and Understanding Politicians" // Gerardo Garibay Camarena es doctor en derecho, escritor y analista político con experiencia en el sector público y privado. Su nuevo libro es “Cómo jugar al ajedrez Sin dados: Una guía para leer la política y entender a los políticos”