Dave Graham (NYSE)

MEXICO CITY (Reuters] – There are tentative signs that progress is being made in the talks between Mexico’s government and private sector to find a solution for President Andres Lopez Obrador’s divisive plan of strengthening state control over Mexico’s power markets.

Mexico is keen to prevent conflict with the United States through a regional trade agreement. The private sector recently indicated that it agrees with some government concerns regarding the power market.

Business leaders are also encouraged by Lopez Obrador’s engagement of one his most trusted aides during the process. This could open the way to consensus.

Enoch Castellanos Castellanos is president of Canacintra, Mexico’s largest industry association.

Castellanos says the talks are far from over, but others with knowledge of them say they remain at loggerheads. A request to comment was not received by the president’s office.

Lopez Obrador (a left-leaning resource nationist) believes that it is necessary to change the law. Past governments have tilted the electricity market towards private capital. It has weakened the Comision Federal de Electricidad state power firm and put the public at risk.

In order to avoid the CFE becoming undercut due to excess capacity, business organizations have stated that they are open to changing the rules that regulate so-called “self-supply permits”, which permit companies to produce their own electricity.

The CFE is under pressure because of the high transmission fees that private energy suppliers pay.

According to people familiar with the negotiations, such changes may give the president political wins in the revamping of the market. However, negotiators are seeking other changes to ensure that they do not breach the United States-Mexico Canada Agreement (USMCA).

Lobbyists for businesses are encouraged by Adan Augo Lopez’s role in the behind-the scene talks, which they claim was taken by him. He is a close friend of President Trump.

Ildefonso Guajardo an opposition lawmaker, said “He’s one man with great politics ability and I believe it’s positive sign.” Ildefonso Guajardo was Mexico’s former economy minister.

Lopez, according to business leaders, is more likely than Manuel Bartlett or Energy Minister Rocionahle to negotiate a deal. They have held firm support for the original plan.

A request for comment was not received by the interior ministry. The CFE and the energy ministry did not respond to a request for comment.

U.S. PRESSURE

Mexico’s diplomat allies were alarmed by the president’s suggestion to place CFE above private businesses.

U.S. The U.S.

Lopez Obrador stated that “We will not fight with the U.S. government.”

According to government officials, the president insists that the agreement will be upheld.

However, to prevent that from happening, the legislation will have to exempt various restrictions on investors rights. Kenneth Smith is one of the Mexican officials responsible for negotiating the USMCA under the current administration.

Smith indicated that the President’s Bill could be used to bring suit against investors, and claims for compensation under international dispute panels. Mexico would then be liable for heavy indemnities.

His words were: “Mexico is in a very fragile position if they get into a dispute solution situation of this kind.”

There are hints that there may be some common ground. However, it is not clear what compromises could be made by the government. Business leaders believe that the president will pass constitutional changes, despite the ambiguity.

To get the votes, it requires a two thirds majority in Congress. Lopez Obrador made open overtures to Guajardo (opposition lawmaker) to secure these votes. Both the president’s Morena party, and its main allies in Congress are short of a majority overall.

It was actually the PRI who oversaw the 2013 liberalization in the electricity market. Guajardo claimed that the party wouldn’t support a bill to discourage investment in clean electricity, which would have adversely affected Mexico’s industrial competition.

Guajardo explained that was Guajardo’s main problem with President Obama’s initial proposal. Guajardo was skeptical that an amended energy bill could be put to vote prior to the close of the current Congress session at the end April or before the June gubernatorial election.