Energy Law

Recent Energy Development in Latin America and the Rule of Law

15/01/2019 |

According to the World Energy Issues Monitor issued by the World Energy Council [1], Latin America and the Caribbean region (LAC), especially southern LAC countries are still dealing with the drop of oil and other commodities prices. These circumstances affect the economies of many countries, especially those highly dependent on oil exports such as Brazil, Venezuela, Ecuador, Bolivia, Colombia, Mexico and Argentina. In this regards there is a close link between commodity prices, electricity prices and regional integration; however, it is important to mention that low commodity prices have positively affected net energy importer countries in the region. Many of the Central American and Caribbean countries dependent on fuel imports to generate electricity have benefited from this situation. Screen Shot 2019-01-15 at 22.06.57.png

In terms of renewables, the above-mentioned document establishes that LAC has a tremendous hydro-potential. Countries such as Ecuador have implemented strong policies to take advantage of these resources, and at the moment, 78% of their energy matrix comes from hydro generation. Nevertheless, the risks associated with this hydro potential are closely related to the variability of hydrological cycles and extreme weather events such as El Niño.

Nevertheless, the Rule of Law seems to be a common topic for all the countries around the region; the philosopher Joseph Raz[2] explains that as a matter of analytic clarity, the Rule of Law, in particular, must be distinguished from democracy, human rights, and social justice. The abovementioned philosopher explains that the rule of law’ means literally what it says: the rule of the law. Taken in its broadest sense this means that people should obey the law and be ruled by it. But in political and legal theory it has come to be read in a narrower sense, that the government shall be ruled by the law and subject to it. The idea of the rule of law in this sense is often expressed by the phrase ‘government by law and not by men’. 

The Rule of Law in Mexico is also a common topic in the internal policy agenda as a country with over 120 million people and the world’s 15th largest economy, is a major oil producer, and has some of the world’s best renewable energy resources; recently, our energy mix becomes more diverse, but is still more oil-dependent in 2040 than the United States or Canada are today.

Mexico is currently undergoing through significant changes in how its energy industry operates. A series of documents have been published by the federal government containing information about the changes already achieved in the Mexican Constitution and the plans for the future operation of the industry, which was determined by modifying the Secondary Laws and its procedures.

A quick look of the past reminds us that the electricity industry in Mexico has been state-owned for over 50 years, where the Federal Electricity Commission  (“CFE”) has been in charge of the generation, transmission and distribution businesses in the day to day operation as well as the planning of the electric system. In 1992, the figures of Independent Power Producer, Cogeneration, and Self Supply Scheme were developed to promote the participation of private industry in the electricity sector in Mexico [Self-supply in Renewable Power]. The first scheme was established for private generators to build, operate, and maintain power plants dedicated to the CFE through long term Power Purchase Agreements (“PPAs”) while the other figures were meant to allow private companies to build their own power plants in order to supply themselves through these. However, this opened the opportunity for private generators to build power plants in order to supply the private industry as well. Despite the above, the mechanisms through which private industry could participate were limited and had economic complications for the CFE. The CFE retained control over which projects could be built and could apply restrictions on plant operations which creates uncertainties and risk for private investors. On the other hand, the CFE’s inability to compete for the big industrial consumers, those which provide big profits for the organization, was limited by its obligation to stick to regulated tariffs. This resulted in lower investments in the electricity industry which results in high tariffs and inadequate infrastructure.

In this regards, between 2018 and 2031, it is expected that 55,840 MW of electricity generation capacity will be added, of which 37.4% corresponds to conventional technologies (20,876 MW) and 62.2% to clean technologies (34,964 MW). The two technologies with the greatest contribution to the system are combined cycle power plants with 33.9% and 24.2% wind power plants. For the end of the prospective period, a total generation capacity withdrawal of 15,814 MW is estimated, associated with the withdrawal of 137 units in most conventional technologies.

By 2031, generation is expected to increase 43.0% to 456,683 GWh, of which 54.1% will be generation with conventional technologies and 45.9% with clean technologies. On this matter, 2018 is expected to be a year full of energy in which several projects will be carried out. It’s clear that the path to 2030 will have difficulties and successes and the only way to achieve the 2030 energy challenge (sustainable, clean and affordable energy) will be through the creation of a successful synergy between government, academia, society and industry.

By 2031, generation is expected to increase 43.0% to 456,683 GWh, of which 54.1% will be generation with conventional technologies and 45.9% with clean technologies

Rodolfo Rueda Ballesteors

Finally, going back to Raz, the doctrine of the rule of law does not deny that every legal system should consist of both general, open, and stable rules (the popular conception of law) and particular laws (legal orders), an essential tool in the hands of the executive and the judiciary alike.

Mexico as a LAC country is facing an important change in their political paradigm; in that regards, John F. Kennedy said ones that “Change is the law of life. And those who look only to the past or present are certain to miss the future.” In connection therewith there is a constant that must never change – The Rule of Law-; in my perspective the main principles of rule of law established by Raz, that in Mexico we should follow in this interesting time of change are:

  1. Laws must be stable.
  2. The making process of particular laws (particular legal orders) should be guided by open, stable, clear, and general rules.
  3. The independence of the judiciary must be guaranteed.
  4. The courts should have review powers over the implementation of the other principles.

About the author:


Rodolfo Rueda focuses his practice on power, renewable energy projects and all facets of oil and gas (upstream, midstream and downstream). Rodolfo has a Bachelor’s Degree in Law, a Master’s degree in Business Administration – with a specialization in energy and business – from the ICADE Business School at Universidad Pontificia de Comillas (Spain) and a Master’s degree in Business Administration from Stratchlyde University Business School (Scotland).

[1] World Energy Council. World Energy Issues Monitor 2018 page 83

[2] The authority of law: Essays on law and morality. Joseph Raz. Clarendon Press

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