Why does the energy reform keep on being delayed?

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The discussion and approval of the secondary legislation of the energy reform has once again been delayed indefinitely. The extraordinary periods of the Legislative Power have not been able to address the pending issues and, on the contrary, have caused new points of conflicts that discourage the agreement. On this occasion, the National Action Party (PAN) stepped away from the energy negotiations due to fundamental disagreements with the political-electoral reform. The aforementioned party insists that as the standardization of the state legal frameworks keeps on being delayed, the discussion energy might not be addressed until the next ordinary session period, in September. Any delay on the secondary legislation not only slows down the general impact of the inevitable process of the energy sector’s liberalization but it also diminishes the possibilities of seeing any tangible economic benefit during the current administration. However, PRI seems to slightly tolerate this legislative impasse. If that is the case, what is the political calculation behind such a risk?

One explanation is that this may be related to a strategy that aims to decrease the believable threat that a referendum could potentially sabotage the energy reform. As it is known, such a tool of citizen participation, which was a result of the 2012 political reform and has just been regulated a few months ago, represents the last element of resistance the left might use against the liberalization of the energy sector. It is not a minor issue, especially for the Democratic Revolution Party (PRD), who, in the face of the coming 2015 elections, is keen on restoring its lost legitimacy as an opposition force, which was severely damaged with its active participation in the Pact for Mexico. However, due to its regulations, the process of a referendum is complex and requires of supervision of its different stages, from the leaderships within Congress – the body that is firstly responsible for the procedure – , the National Electoral Institute (INE) – the institution that has the responsibility of validating the number of signatures that the request has – , and the Supreme Court of Justice – the organization that has to determine whether the question asked in the referendum is Constitutional or not, that is to say if it is precedent and viable.

The aforementioned point is quite important given the fact that the maximum legal authority in the country will be the most complicated obstacle to overcome if any type of referendum is to be made. The Court ought to decide, given the case, if the question set by petitioners in the referendum is not one of the restrictions established in the Law of Popular Consultations, which forbids several issues to be made into a public questioning. Some of the issues that cannot be put into a consultation are those regarding public income, for instance, taxes; or regarding the energy reform, any benefits, bonuses or profits that result of oil income. Although both PRD as well as Andrés Manuel López Obrador have presented drafts of projects to implement a consultation with the purpose of collapsing the energy Constitutional reform, these efforts have not made any progress whether it is due to mistakes regarding the compilation of minimum requirements or due to the ambiguity of the questions asked (the law says that the question ought to be clear and possess a clear objective). That way, those which oppose the reform have not been able to successfully set a consultation during the last few months. The main reason for this is that the text of the Constitutional reform does not offer enough elements to set a question that does not have to do with the State income and overcome the obstacle of law restrictions. Nevertheless, the details of the secondary legislation, which is up for a debate, might represent an opportunity to overcome the aforementioned legal mess and, at least, jeopardize the legitimacy of the liberalization process. While there is no ruling, there will be no reason to attack and derail the reform. If such a status prevails, the chances of a referendum will begin to fade. If the process is not issued before September 15th, it will be legally impossible to carry out a referendum during the 2015 elections since the law sets that date as the deadline to be able to use that political instrument during the next electoral process. Any request after that deadline would have to wait until the 2018 elections.

Another scenario envisions the referendum as an unavoidable event and, regardless of its result and the low possibility that it may prove to be binding, it will indeed have political consequences. The latter is enough reason for the federal government to find the largest amount of political consensus in the voting of the secondary legislation and thereby, contrast it with the referendum’s participation in order to strengthen the legitimacy of the reform.

What is true that as long as the approval of secondary legislation of the energy reform keeps on being delayed, there will not be a thorough discussion in Congress that will impact upon improving the regulatory bodies and, apparently, not a lot of people seem to care. The consequences of two months of delays for the investment portfolios of the oil industry’s major stakeholders may not be too important in the long term, especially if uncertainty is controlled through the access to privileged information on important issues. Those who will be affected by the passing of time are specific stakeholders with little influence or sanction powers that can gain benefits in the long term – for instance, the transportation industry as well as the storage of gas and electricity sector – and their users. The lesson to be learned is that no matter what the official rhetoric says about the importance and transcendence of a policy, it can always be delayed to respond to political and party goals.


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