Electrical reform will trigger exit of manufacturers: industry group

Approval of the federal government’s proposed electricity reform will result in manufacturing companies leaving the country, according to the head of a national industry group.

Luis Hernández, president of the National Council of the Maquiladora Industry (INDEX), predicted that companies will depart Mexico if the constitutional bill passes Congress because the Federal Electricity Commission (CFE) won’t have the capacity to provide them with sufficient clean energy.

The controversial, widely criticized reform – which is expected to be put to a vote in April – would guarantee 54% of the electricity market to the state-owned CFE and thus limit the participation of private companies that generate renewable energy.

“Companies will start to leave because the CFE doesn’t have a way to provide renewable or clean energy in accordance with what the USMCA suggests,” Hernández told a press conference, referring to the North American free trade agreement that took effect in 2020.

“We have a lot at stake,” he said, citing the risk of capital flight as well as likely difficulties in attracting new investment if the proposed electricity reform becomes law.

The INDEX chief said that approval of the bill would also have a negative impact on employment.

“If a reform is passed you can’t go against [it] … we’re going to have a limitation – investment will no longer be encouraged and employment growth will no longer be encouraged,” Hernández said.

He said the negative impact of the reform would be felt most in Chihuahua, Querétaro, Baja California and Tamaulipas, where many manufacturers have factories.

With reports from Reforma