Legislative proposal to create INMECOB

By: Mauricio Arciniega

Last Wednesday, June 10th of this year, Senator Ricardo Monreal, member and leader of the Morena Parliamentary Group, presented before the Permanent Commission of the Congress of the Union a legislative proposal to amend articles 27 and 28 of the Political Constitution of the United Mexican States. With this proposal it is envisaged to create the National Institute of Markets and Competition for Well-Being “INMECOB” by its initials in Spanish, as an autonomous constitutional body with legal personality, technical, operational and management autonomy. The legislative proposal aims to reduce public expenditure.

With the creation of the INMECOB, the Federal Telecommunications Institute (“IFT”), the Federal Anti-Trust Commission (“COFECE”) and the Energy Regulatory Commission (“CRE”) would become extinct, with the aspiration of integrating these regulatory bodies and thus establishing the only one in the area of Anti-Trust and in the Telecommunications, Broadcasting and Energy sectors, without the CRE’s hydrocarbon faculties becoming part of the INMECOB.

However, Senator Monreal announced last Sunday on social media that he will postpone the legislative process of this proposal in order to start a process of evaluation and discussion of it. It is important to point out that, if the Legislative proposal is approved in the current terms, there would be a budget and personnel reduction, affecting the technical and specialized functions developed by the IFT, the COFECE and the CRE, natural monopolies indispensable to the economy. Furthermore, it would not be in line with the Chapter 18 requirement of the USMCA, which is to have an independent telecommunications regulatory body, so, among other reasons, the Legislative proposal could be expected to have a direct impact on investment in our country.


Possible reforms to the Pemex law

On January 9, 2019, deputies of the Parliamentary Group of Morena filed before the Permanent Commission of the Congress of the Union an initiative that reforms, adds and revokes various provisions of the Petróleos Mexicanos Law (the “Initiative“).

The purpose of the Initiative is to “establish a legal framework that guarantees the Federal Executive, through the General Director of Petróleos Mexicanos (the “Director“), to operate in an integral manner when executing and fulfilling the purposes of exploration, exploitation and refining.” (Parliamentary Gazette, 2019)

The deputies proposed, mainly, to limit the powers of the Board of Directors of Petróleos Mexicanos (the “Board“), since they mention that the regulation with which they operate today promotes the disintegration of responsibility at the time of making decisions, since the Law of Petróleos Mexicanos recognizes to the Board the making of executive decisions that, arguing the position that in any company of corporate structure, such decisions would correspond to the Director. By the above, they proposed to expand and grant greater powers to the Director for the management and strategic direction of Petróleos Mexicanos (“Pemex“) according to the national energy policy instructed by the federal Executive.

The deputies proposed that the following premises, among others, should be taken into account:

  • Establish a legal framework that guarantees and allows the Director to operate Pemex and the affiliated companies in an integral manner to execute and comply with the exploration, exploitation and refining purposes;
  • Limit the powers of the Board and grant greater powers to the Director to lead and establish the strategic direction of the company;
  • Incorporate the Director to the Board as a permanent guest with voice, but without vote, foreseeing that said governing body may not meet without his presence;
  • A reduction in the number of committees, in order to concentrate attention on matters in two committees supporting the functions of the Board. Subsisting the Audit Committee and merging two to create the Investment, Procurement, Works and Services Committee, the latter would include the investment functions, as well as the analysis and recommendations of the Business Plan; and
  • Transfer to the Director the business plan, the central and strategic management of Pemex, its productive subsidiaries and affiliated companies, as well as any company in which Pemex has direct or indirect share capital, likewise, appoint and remove the directors of Pemex who occupy positions in two hierarchies below the Director, as well as functions related to tabulators and human resources, functions that currently correspond to the Board.

With respect to the proposed Initiative, several media have pronounced on the matter, pointing out risks if the text were approved as it was presented, since it promotes the centralization of the takeover of the General Director of Pemex, a situation that is contrary to the best corporate practices in the market, and that slows down the efforts that have been made in the last 12 years by the institutionalization of this productive enterprise of the State. (Mexico Evalúa, 2019)