MI’s Mexico Public Affairs Chatter – Nov. 25, 2024

Elimination of autonomous regulators moves ahead, with some last-minute changes

Last week, the Chamber of Deputies approved the reform that eliminated seven autonomous regulators. While it seemed as if Congress would approve the proposal without any changes, as with previous reforms, leadership made some tweaks at the last minute, apparently in an effort to comply with the USMCA’s provisions on competition, regulation and telecommunications. It remains far from clear whether the changes will be sufficient.

The version the Senate now has still calls for the elimination of the Federal Telecommunications Institute (IFT) and the Federal Commission on Economic Competition (Cofece). The reform calls for their duties to be split as follows:

  • The IFT’s regulatory functions (governing concessions, spectrum and permits) will be transferred to a new entity; the text of the reform does not specify, but press reports citing Morena’s legislative leadership indicate it could be the new “Digital Transformation and Telecommunications Agency”, led by José Merino.
  • Meanwhile its competition functions will be transferred to another (similarly unspecified) entity, which some media reports indicated could be Promtel (the entity currently in charge of coordinating the Red Compartida). Morena Majority Leader Ricardo Monreal said the specifics are currently being drafted. As far as we can tell, it remains unclear whether these functions will be merged into a new Competition agency, as various media reports last week indicated, or will be separate, as the current version of the text of the reform suggests.
  • Cofece’s functions will be absorbed by a new entity, presumably within the Economy Ministry, but with its own legal framework. Again, we expect more clarity as the discussion on secondary legislation moves forward.

IFT and Cofece will cease to exist 180 days after the implementation of new secondary telecommunication and competition laws, for which there is no clear deadline.  Meanwhile the other five bodies will disappear within 90 days once relevant laws are adjusted.

It remains to be seen how the new entities will operate, to what extent they will be independent of the executive, and how much the new Trump administration will care when reviewing USMCA. (AT&T has formidable clout in the US, so rules governing the telecommunications sector may be especially problematic.) But almost for sure the institutions will be semi-paralyzed over the next year or so while all these changes are being made, potentially deterring investment and complicating administrative decisions by affected businesses.

 

Why does telecom get a special regulator?

Chapter 18 of the USMCA does not call of a specific regulatory setup for telecom, as “the Parties recognize that regulatory needs and approaches differ by market, and that each Party may determine how to implement its obligations under this Chapter”, as long as the “regulatory body is separate from, and not accountable to, a supplier” and its decisions “are impartial with respect to market participants”. However, it establishes that “[f]or Mexico, the telecommunications regulatory body is autonomous from the Executive Branch of government, is independent regarding its decisions and functioning, and has the purpose of regulating and promoting competition and efficient development of telecommunications, as set out in existing Mexican law.”

For its part, Chapter 21 requires each country to “maintain a national competition authority […] responsible for the enforcement of its national competition laws” and that they “treat[…] persons of another Party no less favorably than persons of the Party in like circumstances”.

And so, while Morena has ensured that its constitutional reforms cannot be appealed to the Supreme Court, the changes could be seen as an implicit recognition that the Constitution should still comply with international treaties, or, at the very least, that the new administration will try to avoid disputes with international investors.

Morena’s leadership has said that the approved changes ensure compliance with the USMCA. According to Congressman Alfonso Ramírez Cuéllar, a Vice Coordinator of Morena’s caucus, “this will be an independent body, with the authority to conduct investigations and set fines, which will allow for greater competition in our country”.

 

Implications for the energy sector

As expected, the Chamber of Deputies also approved without changes the disappearance of the Energy Regulatory Commission (CRE) and the National Hydrocarbons Commission (CNH). There remain, however, some unresolved issues. President Sheinbaum announced a few weeks ago that the CRE would become a decentralized entity within the Energy Ministry (SENER), maintaining its technical autonomy but not its independent budget. There is still no clarity regarding the CNH.

Several experts have pointed out that these changes would require several significant legal modifications in addition to the constitutional reform, in effect a full redesign of the sector’s regulatory framework. These include changes to the Organic Law of the Federal Public Administration; the Law of Hydrocarbons; the Laws of PEMEX, CFE and the Electric Industry; as well as the elimination of the Law of Coordinated Regulatory Entities on Energy Matters.

 

Potential implementation issues

The reform’s transitory articles present several challenges. Firstly, they set a 90-day limit to approve the necessary secondary laws, a notoriously short term for such complex matters.

Moreover, there is a seeming contradiction on the effective date of the extinction of the current entities: while a transitory article says they will cease to exist the day after publication on the official gazette (DOF), another article says IFT and Cofece will cease to exist after 180 days after secondary legislation, which could set the stage for legal disputes regarding these bodies’ action during that transition period.

 

What else was approved?

In addition to IFT, Cofece, CRE and CNH, the Chamber of Deputies eliminated the following entities:

  • The National Transparency Institute (INAI) will see its duties split among the new Anticorruption Ministry, the National Electoral Institute (INE) for matters related to political parties, and the Federal Conciliation Center for matters related to labor unions.
  • The National Council for the Evaluation of Social Development Policy (Coneval) will now be a part of statistics office INEGI.
  • The National Commission for the Continued Improvement of Education (MEJOREDU) will move to the Ministry of Education (SEP).

 

What’s next?

  • The reform has moved to the Senate; once approved there, it needs to be approved by a simple majority of state legislatures.
  • As described above, Congress will have 90 days to promulgate the related secondary laws, and 180 days for Cofece and IFT.

 

Contact:

Laura Camacho

Executive Director Miranda Public Affairs

laura.camacho@miranda-partners.com

 

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