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LatinNews Daily - 18 November 2021

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In brief: Fitch warns on Mexico’s energy reform

* International credit ratings agency Fitch has affirmed Mexico’s long-term foreign-currency and local-currency issuer default ratings at “BBB-” with a stable rating outlook. However, it flagged up various concerns, including about the Mexican government’s controversial electricity reform, which would give the state-run electricity firm, Comisión Federal de Electricidad (CFE), a pre-eminent role in the domestic market to the detriment of private renewable energy generators. Fitch warned that if approved, the reform would “lead to underinvestment in the electricity sector and non-competitive electricity pricing and would weaken Mexico's regulatory quality”. Fitch adds that it does not expect that the reform, which is due to be debated in April 2022, will be approved in its current form given the results of the June mid-term congressional elections which saw the ruling Movimiento Regeneración Nacional (Morena) lose its two-thirds majority in the federal lower chamber (crucial for approving the reform). However, Fitch said that “a version of the proposals could be approved.” It added that a “pattern of microeconomic policy intervention in markets and distrust in autonomous regulatory entities continues to affect Mexico's investment climate and governance quality, although the main focus continues to be the energy sector.”