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AMLO, Energy Constitution what the President's game

 Two weeks ago, the already contentious announcement that CFE would prioritize the use of power produced by CFE rather than the independent producers.  This was already seen as a hard knock on the back of foreign investors, but it got worse last week when AMLO started talking about expropriation, not only that but those who have installed a rooftop solar systems to reduce power costs would be forced to remove them.  

According to th the law before Congress, those who saw these systems removed would be compensated, although considering the state of Mexico's treasury, it's not entirely clear, the CEO of CFE on Monday indicated that the best bet was nationalization without compensation, like in 1936.  The old men who run Mexico today have this vision of Mexico as an energy-independent country (85% of all-natural gas is from the US, 22% of Mexico's electricity is purchased from the US).  This dream is based on this vision of a perfect example of what Cuba and Venezuela tried (and failed to achieve).

What is AMLO's real objective here?  He knows depsite living in the 1950s that his energy reform will be blocked by the courts, and that the actions he is taking will create a world of hurt for Mexico within the North Amercan free trade agreement. So what's the end game?

AMLO's end game is to destroy the PRI (center left political party, that governed Mexico for 70 years), and break its alliance with the PRD (the right of center party).  Because for MORENA in 2024, the Preisdential election are the key to maintaining his 4T program.  

As a strategy it may work, but it could blow up in his face.  However, its AMLO's only option; his three major projects:  Maya Train, Dos Bocas Refinery and the new Mexico City Airport are certain to be operating and financial disaster.

The Maya Train as a replacement for air travel/Bus is certrain to fail, since it doesn't even make it to merida, the Yucatan largest city, the train stop will be 60km from the city, and the same situation for the train stop for Chichen Itza where the sation will be 15 km from the mayan ruins.

Dos Bocas is not only smaller than what AMLO had annoucned it will only produce gasoline and no other distilates, so Mexico will increase its stockpile of "unsellable" bunker fuel -- because of its high sulfure content that Mexican refineries are unable to remove.

The new Mexico City airport will be completed prior to 2024 election, as will be both the Maya Train and the Dos Bocas refinery, bit again there will be no direct access road, instead taxi will drive via some of Mexico City's worse slums, with a projected 2/3 hour drive from central mexico City to the new airport.

In a sense, for the people none of these issues are important, why becaus they will never use the Maya Train (its in the second least populated state in Mexico), refineries are too complicated a concept and poor people don't use airports (in MExico at least).

Therefore AMLO's decision to slam the foreign investors in the Energy sector is an excellent electroal strategy, (a) slip the PRI, (b) make the foreigners be the bad guy and (c) ensure that Morean wins in 2024 and continue AMLOs 4T strategy.  

The impact for Mexico is another issue entirely, already Mexico suffers from energy shortage, there is  30% surplus but its in all the wrong places.  CFE is broke and has received no support from the Treasury to fund its modest (US$ 10 billion CAPEX over 5 years) investment program.  Already some state saw this sumer's consumption hitting nearly 99% of capacity.  Moreover, there are no plans to address these problems.  

ON the bright side for AMLO is "war against foreign capital" seems to be working, foreign investment is down nearly 80% over the past two years, and appetite for Mexican soverign debt is at a 10 year low, with an increased amount of Mexico's debt being issued locally.  Therefore we estimate that GDP will be negative for 2021 and flat for 2022 (inflation adjusted), nonmially GDP growth in 2021 will be around 2.0%, but inflation is anticipated to be around 3.4%.

Slower economic growth should translate into lower demand for energy

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