Rejection of electricity reform improves Mexico’s outlook

The rejection of the electricity reform proposed by President Andrés Manuel López Obrador has already reaped a first positive effect on the economic plane.

Yesterday the rating agency HR Ratings ratified the rating on Mexico’s sovereign debt and upgraded its outlook from negative to stable. For the improvement in the perspective of the rating agency, in general, counted the macroeconomic stability and the fiscal responsibility of the López Obrador government. But what stands out is the non-approval of the Electricity Reform.

Clearly and specifically, HR Ratings warns of the greater certainty that the conclusion of the energy reform process brings to private investment.

This – he anticipates – could benefit the behavior of economic growth in the medium term.

All the other arguments of the rating agency, without detracting from their importance, are practically the same as those that have been weighed by all the rating agencies with respect to Mexico.

Among them, the T-MEC, the stable fiscal balance, the strengthening of tax revenues, the fight against tax evasion, prudence in the exercise of spending, the extraordinary level of international reserves and the limit on indebtedness.

All these elements have certainly been taken care of by the Chief Executive and have been precisely well weighted not only by HR Ratings, but also by other rating agencies.

What has generated uncertainty have been initiatives such as the Electrical Reform. Even though from very early in the process, most of the forecasts indicated that it would not be approved, if it generated concern, lethargy of the investments and attention of the rating agencies.

The change in outlook from negative to stable in the case of HR Ratings confirms this. A fundamental element for this change in perspective has to do with the evolution of the sovereign debt metric. HR Ratings estimates that it will be below expectations in the coming years, due to the proper management of fiscal metrics. Other factors considered by the rating agency are the historically high level of international reserves and the ratification of the Flexible Credit Line by the International Monetary Fund. Another element that stands out from the firm’s analysis has to do with economic growth.

The agency revised down GDP growth for the end of 2021, compared to the previous projection.

Last year, real GDP growth was 4.8%, slightly lower than the 5% estimated in its latest rating report. However, the sovereign net debt metric stood at 46.44 percent of GDP, lower than the 48% previously projected. What can be inferred is that HR Ratings changed its outlook from negative to stable among other reasons because the approval of the Electricity Reform was ruled out. And this confirms that the initiative, also known as the Fuel Oil Law, would have had negative effects on the national economy. On the contrary, its rejection implies the possibility of an improvement in the economic growth of the country.

Undoubtedly, the rejection of the Electricity Reform is positive, but it does not mean that the problems in this sector will end.

Litigation is coming due to the announced review of self-supply schemes and independent producer contracts; The actions of the government and the CFE are coming to promote their model based on combined cycle power plants, with the uncertainty of the gas they need to operate, the lack of investments in transmission and others that in the end will lead to blackouts and loss of opportunities for the economic growth.

Electric power in Mexico continues to be a challenge. At the time


The Secretary of the Treasury, Rogelio Ramírez de la O, said that Mexico will be extra careful to issue debt in the financial markets in the face of the increase in interest rates at a global level and a climate in which it is noticeable from leagues that the liquidity. Good! On the other hand, the undersecretary of the Treasury, Gabriel Yorio, said that they are preparing tax incentives (VAT and ISR) basically to promote the development of the Isthmus of Tehuantepec corridor and attract investment.

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Marco A. Mares


Rich and Powerful

He has worked continuously in newspapers, magazines, radio, television and the Internet, in the last 31 years he has specialized in business, finance and economics. He is one of the three hosts of the program Alebrijes, Águila o Sol, a program specialized in economic issues that is broadcast on Foro TV.

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