IN the mid-20th-century Mexico nationalised oil (in 1938) and electricity (in 1960). Public ownership of energy resources was a foundation of the country’s industrialisation.

From the 1980s onwards, neoliberalism took over and governments began to undermine both Pemex (the national oil company) and the CFE (Federal Electricity Commission).

The final straw came in 2013 when the government of Enrique Pena Nieto, with fraud and bribery, passed a privatising energy reform package which gave away the entire sector to speculative corporations and enshrined this in the constitution.

With President Andres Manuel Lopez Obrador’s election in 2018, reclaiming these resources for the nation was one of his basic aims.

Amlo surprised many by succeeding in persuading the US to agree to excluding the energy sector from the renegotiated Free Trade Agreement in July 2020, and then managed to pass a law restoring Pemex as the major actor in petroleum production and refining. 

But reclaiming electricity turned out to be much more difficult. Giveaway contracts to foreign companies (the most prominent being Spanish company Iberdrola), in which the state built the infrastructure and gave it to private operators for free, and then paid inflated rates to buy back power generated, led to astronomical losses for the CFE, and the clear intention was to dismantle this public enterprise completely.

In February 2021 Amlo sent a Bill to congress to restore the CFE’s priority in power generation. All private contracts would be examined for corrupt or illegal clauses (which in most cases could be clearly demonstrated in court), leading to their annulment and recovery of lost funds, an end of subsidies to private companies and restoration of national self-sufficiency. 

The Bill was passed, and several corrupt contracts were indeed annulled, but full application of the new law was then blocked by legal stays of execution requested by private companies and granted by corrupt judges.

It became clear that Amlo’s reform could only succeed as a constitutional amendment, and on September 30 this year he sent a revised set of proposals to congress as a constitutional package. 

The new package restores the CFE as a policy-making federal agency (and not as previously, a public company subject to market rules), generating 54 per cent of the energy (previously only 38 per cent) and controlling tariffs and the national grid.

Private companies can generate 46 per cent but must sell to the CFE at regulated prices and receive no subsidies. 

Hydroelectric plants, owned by the CFE even under the previous law, account for over 30 per cent of Mexico’s generating capacity, but the existing law forces them to leave most of their turbines idle so as to favour private companies using other forms of production.

The CFE will now be able to instal new turbines and produce hydropower at full capacity.

Regulation of consumer tariffs still exists in Mexico, which is why electricity rates are about one-third of those now charged in many European countries (including Britain).

This regulation was to have ended very soon under the existing law, but will now be maintained and reinforced. 

Finally — and this is new — the proposed constitutional amendment also covers lithium deposits and processing, which is declared of strategic importance and subject to exclusive public control and exploitation.

Mexico has some of the largest lithium deposits in the world, mainly in the north-western state of Sonora.

Lithium was of course a factor in the Bolivian coup 18 months ago, so this is a bold move by Amlo. 

This is a high-stakes move by the Mexican president, especially since constitutional amendments require a two-thirds majority in congress.

Amlo’s Morena party has a clear majority, but even with two small allied parties it is short of two-thirds. 

But Amlo — always an astute tactician — is not negotiating with the opposition.

Rather, he has thrown down the gauntlet to the PRI, the former dominant party, which before its surrender to neoliberalism had always based its appeal on nationalism and popular reforms.

“Does the PRI want to defend the heritage of Lazaro Cardenas [who nationalised oil in 1938] and of Lopez Mateos [who nationalised electricity in 1960], or that of Enrique Pena Nieto [responsible for the 2013 privatisation]?” 

The PRI faces a real dilemma, since its electoral and legislative alliance with the right-wing PAN has undermined its credibility; it is in danger of takeover by the PAN. 

In recent weeks the president has repeatedly insisted on the importance of energy sovereignty.

Aware of the need to maintain investor confidence, he explains that the proposed reform does not expropriate any company — it simply provides for reinforcement of the CFE as the main provider with power to regulate tariffs and invest in the public interest.

This will benefit Mexican consumers and indeed small and medium companies.

It would seem logical to fear a negative reaction from the US, but so far Washington has not uttered a word on the subject.

Amlo’s diplomatic skill comes to the fore here: while pushing his electricity reform and criticising US policy on Cuba, he has gone out of his way to co-operate on trade, security, migration and aid to Central America.

At a high-level bilateral meeting last week, Amlo charmed the socks off US Secretary of State Antony Blinken and National Security Sdviser Jake Sullivan.

There is another relevant point here in US domestic politics: the huge Mexican-American community (much bigger than the Cubans or Venezuelans) does not consist of right-wing exiles but of economic migrants, who have no interest in voting for anti-Amlo candidates for the US Congress — in fact quite the opposite. So there is no cheap political gain here for Joe Biden. 

David Raby is a retired academic and independent researcher on Latin America. He can be reached at [email protected] and on Twitter @DLRaby.