The Day at a Glance | October 21 2021

The Top

*International Chamber of Commerce Mexico warned about severe consequences if the electric power reform is approved in the country.

*Retail sales in Mexico exceeded estimates by avoiding a contraction in August (0% m/m; 6.6% annual).

*Inflation in the United Kingdom set at an annual 3.1% rate during September.

*South Korea´s exports increase, Taiwan and Japan show firm global demand during September despite a slowdown in China.

*Initial jobless claims in the United States remained under 300 thousand for a second week (290k vs 300k e.).

Economic environment

ICC Mexico warns that the cost of approving the electric power reform in the country would be high. In a virtual press conference, the International Chamber of Commerce Mexico (ICC) called on legislators to stop the electric power reform´s approval through the Executive power on September 30th. For the ICC, the proposal is not only unconstitutional, but it could lead to a four decade setback in electric power production, move Mexico away from its international environmental protection objectives, put foreign direct investment confidence at risk, and would imply costly international legal disputes. This last point is one of the most important for the ICC Mexico as the reform could indirectly imply expropriation and private investors could seek compensation because of the government´s action. This would lead to claims worth millions regarding undertaken investments (currently estimated at 44 billion pesos). Manuel Bartlett, Director of the Federal Electricity Commission (CFE for its initials in Spanish), has assured that businesses would not be compensated, but the ICC assured that companies would seek international instances and open legal processes to claim compensation; disputes could last up to 4 years. Currently, Congress has 180 days – starting the day that the reform was presented – to approve or reject the proposal. Reports on the most recent negotiations suggest that the reform will not be approved as it was presented and that opposition has enough force to stop it. The likelihood of the reform being approved is relatively low considering that 2/3 of votes are required in Congress, as well as being backed by simple majority among the country´s 32 local congresses.