Mexico’s lower house congress approved President Andres Manuel Lopez Obrador’s (AMLO) reform to the hydrocarbon law that restricts private competition, strengthening state-run oil company Petroleos Mexicanos (Pemex). The vote was approved with 301 in favor vs. 147 against and two abstentions. The proposal removes a 2014 transitory provision to stimulate competition, which opened up the energy sector to private participation. The bill will now be passed on to the senate, where a wider proposal to increase state-control over the fuel market will also be reviewed. The senate is expected to vote on Thursday on the much wider bill to increase government control. The reform is AMLO’s most recent effort to strengthen Pemex.
The new bill seeks to eliminate the article from Mexico’s oil law that compels regulator CRE to issue asymmetric regulations to privilege private companies in the sale of fuels from Pemex refineries. The purpose of this legislation was to limit Pemex’s monopoly power over the market. Lawmakers now argue that private participants have already reached sufficient share in the market and such limitation is no longer necessary. AMLO controls congress together with allies and is pressing to pass this reform before the early June midterm elections. “Conditions for private sector operators could become much more complicated, and Pemex could perhaps undercut the competition,” Jonathan Terluk, an analyst at political risk firm Empra in Mexico City, said.
Pemex´s USD bonds were slightly up. Its 6.5% 2027s up 0.62 to 106.394, yielding 5.22%.
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