Mexico’s president seeks power contract review, likens to Argentine debt talks

Mexico’s president seeks power contract review, likens to Argentine debt talks

© Reuters. Mexico’s President Andres Manuel Lopez Obrador attends a news conference at the National Palace in Mexico City

MEXICO CITY (Reuters) – Mexico’s president on Thursday likened a battle between the national power utility and private operators to Argentina’s debt restructuring negotiations with creditors, calling for energy contracts signed by previous governments to be reworked.

The government of President Andres Manuel Lopez Obrador has moved in recent weeks to give the Federal Electricity Commission more control over the industry, and has since said private sector contracts were “predatory” and led to high prices.

Lopez Obrador drew parallels with Argentina, saying governments preceding his leftist ally President Alberto Fernandez had unduly indebted the South American nation and that banks and funds would now have to absorb losses there.

In its ninth sovereign default, Argentina missed payments on around $500 million in already delayed bond coupons last Friday, and its government has been negotiating for more favorable terms on $65 billion of outstanding debt.

Lopez Obrador suggested his government was taking a similar approach in the power sector.

“Predatory contracts were signed, well, I think it is fair that in a different circumstance, we review them,” he told reporters at a regular news conference.

“Or should all the losses be absorbed by the public? Can’t they be shared?” he said. “Everybody puts in a bit.”

Since winning office in 2018, Lopez Obrador’s moves to give the state more weight in the Mexican economy have unnerved investors and led to friction with the United States, Canada, and the European Union.

Last year, his government persuaded companies to waive significant profits from pipeline deals signed under the previous administration. It said the renegotiated contracts saved taxpayers $4.5 billion.

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