The decree that amends the fifth paragraph of Article 25, the sixth and seventh paragraphs of Article 27, and the fourth paragraph of Article 28 of the Mexican Constitution regarding strategic areas and enterprise was published on October 31, 2024.
Following are the main additions to the Mexican Constitution resulting therefrom:
i. The determination of the change in the legal nature of the State Productive Enterprises (PEMEX and CFE) to become Public Enterprises of the State.
ii. The provision that the planning and control of the national electric system, and the public services of transmision and distribution are areas reserved to the government, and that implementing laws will determine how private parties may participate in other activities of the electricity industry, which cannot take precedence over the Public Enterprise of the State (CFE), whose essence is to fulfill its social responsibility and ensure the continuity and accessibility of electricity service.
iii. The provision that the planning and control of the national electric system shall aim at preserving the National security and energy self-sufficiency, as well as providing electricity to the public at the lowest prices possible, avoiding profit-making, to secure National security and sovereignty through the corresponding Public Enterprise of the State.
iv. It is established that strategic areas include lithium, internet service provided by the State, and the activities carried out by Public Enterprises of the State, adding that no concessions will be granted for exploration and exploitation of lithium.
v. The Transitory Articles of the decree whereby the 2013 energy reform was passed, that oppose to the provisions of this Decree are repealed.
The Mexican Congress has 180 days to make the necessary adjustments to the corresponding implementing laws.
Regarding paragraph "ii.", the Decree does not detail or regulate what should be understood by the “prevalence” of the State Public Enterprise in the electricity industry with respect to the participation of the private sector.
Regarding paragraph "v." above, it must be noted that, among other things, said transitory articles provided the following: (a) the conversion of CFE and PEMEX into State Productive Enterprises and the principles that govern them; (b) the creation of the Energy Regulatory Commission and the National Hydrocarbons Commission as coordinated regulatory bodies in energy matters; (c) the creation of the National Center for Natural Gas Control and the National Center for Energy Control as decentralized public agencies; and (d) the obligation of the Ministry of Energy to establish the terms of strict legal separation in the electricity industry. Although the aforementioned Decree does not specify it, we consider that the repeal should refer to the conversion of CFE and PEMEX into State Productive Enterprises. Another possibility is that it touches on the nature of the National Energy Control Center in charge of the control and planning of the national electricity system as a decentralized public body, as well as on the terms of strict legal separation in the electricity industry.
Both matters will have to be defined in the implementing laws.
For any questions or comments, please contact our expert team.
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