LatinNews Daily - 25 March 2022

In brief: Moody’s warns against Mexico’s energy reform

*International credit ratings agency Moody’s has warned that carbon emissions will increase in Mexico if President Andrés Manuel López Obrador’s contentious electricity sector reform is passed as proposed. In a report entitled ‘Policy shift will dampen private investment, delaying country's path to cleaner energy’, Moody’s states that non-financial corporations face “large external risks related to carbon transmission”, given that international creditors prefer “green companies that seek to reduce emissions and diversify into profitable, lower carbon activities”.  Adrian Garza, a senior analyst at Moody’s and co-author of the report, commented that the prioritisation of López Obrador’s government on “energy ‘sovereignty’” had translated into a “continued reliance” on the state-run electricity firm Comisión Federal de Electricidad (CFE), “which has limited capacity to renew its infrastructure and transition to cleaner technologies”. The report states that Mexico has “significantly slowed down” development of new renewable energy generation projects, which has resulted in a decrease in investment and “will likely increase the cost of electricity in the long term”. Nymia Almeida, a senior vice president at Moody’s and co-author of the report, said this will increase operating costs for businesses with exposure to international markets in particular, such as those in the automotive, mining and aviation industries. Another round of talks on the reform, which seeks to favour CFE over private, renewable energy companies, began in Mexico’s lower chamber of congress on 24 March. The ruling Movimiento Regeneración Nacional (Morena) party hopes that a vote on the reform will take place in April.

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