According to Article 27 of the Mexican Constitution, “The generation, transmission, transformation, distribution, and supply of electricity as a public service are the exclusive domain of the State. Private contracts will not be awarded in this arena, and all goods and natural resources required for electricity production are for the benefit of the State.”

Nevertheless, privatization of the electric sector began years ago.

Contracts Granted to Private Companies

In addition to dozens of new contracts granted this year (see “Chiapas Today”, Number 282), the Federal Electricity Commission (CFE) documented in 2001 that around 27 foreign companies from 11 countries have invested in 46 projects:  20 Combined Cycle Centers (CCC), 16 transmission lines (LT), 3 pipelines, one carbon management terminal, one hydroelectric center (Chicoasén in Chiapas, owned by the French transnational Alstom), 3 thermoelectric centers and 2 diesel centers.

The following is a list of the projects granted to foreign companies: (301) LT Central; (302) LT Southeast; (303) LT Ixtapa-Pie de la Cuesta; (304) LT Northeast; (305) SE Center-west; (306) SE Center-east; (307) SE Northeast; (308) SE Northeast; (401) SE West; (403) Northeast; (404) SE North-Northeast; (406) LT Network to Tuxpan II, III y IV; (407) LT Network to Altamira II, III and IV; (410) SE 410 National System; (411) LT 411 National System; CCC Altamira II; CCC Altamira III and IV; CCC Bajío (El Sauz); CCC Campeche; CCC Chihuahua; CCC Chihuahua III; CCC Hermosillo; CCC Mérida III; CCC Monterrey II; CCC Naco-Nogales; CCC Río Bravo II; CCC Río Bravo III; CCC Río Bravo IV; CCC Rosarito III;  CCC Rosarito IV; CCC Saltillo; CCC Samalayuca II; CCC Tuxpan II; CCC Tuxpan III;  CCC Tuxpan IV; CD Guerrero Negro I; CD Pto. San Carlos; CG Cerro Prieto IV; CG Los Azufres II;  CG Tres Vírgenes (10 MW) CH Ing. Manuel Moreno Torres Chicoasén (2a. Etapa); Pipeline Cd. Pemex-Mérida-Valladolid; Pipeline Rosarito; Pipeline Samalayuca; and the carbon management terminal, Thermoelectric Center (CT) Petacalco.

Starting with the 484 MW Combined Cycle Center Merida III in June of 2000, foreign energy companies began to produce under the category “External Energy Producer (PEE).  The majority of these projects are located in the north of Mexico:  Baja California, Baja California Sur, Coahuila, Sonora, Tamaulipas, Nuevo León.  There are also projects in Veracruz, Querétaro and in the Yucatan peninsula (Campeche, Yucatán y Quintana Roo). All of these are in industrial zones and regions, not in indigenous regions in the south of the country where there are few industrial and processing plants. 

The construction of all of these electrical projects have been granted to transnational corporations from 11 counties.  The United States has the largest number of electric companies in Mexico, eight in all:  Applied Energy Services –AES-, General Electric, El Paso Energy International, El Paso Natural Gas, Bechtel (Intergen Aztec Energy, Mérida Pipeline Company Limited), ICA-Fluor Daniel, Westinghouse and EPL. Spain follows with five (Iberdrola, Unión Fenosa, Elecnor, Isolux and Abengoa/Endesa), Japan has four (Nichimen, Mitsubishi, Nissho Iwai and Marubeni), France has two (Electricité de France -EDF- and Alstom) and Canada has two (Transalta and TransCanadá).  The following countries have one company each:   Germany (Siemens), Switzerland (ABB), Belgium (Tractebel, formerly Enron), Italy (Techint Compagnia Tecnica Internazionale), Korea (Hyundai) and Colombia (Eléctricas de Medellín Limitada). (In order to see a detailed breakdown by country, business, projects, characteristics and state, see the document “Inversiones Extranjeras en México” in www.ciepac.org, in the chapter “Documentos y Análisis”). 

Many of these companies have lamentable records of frauds, high costs for energy, corruption, etc.  But this theme will be developed in another “Chiapas Today” bulletin. 

Today, the companies which have been granted the most contracts are Alstom of France, and Mitsubishi of Japan, with four projects each.  Following are Siemes of Germany, EDF of France and U.S. Westinghouse with three projects each.  Each of the following companies have two investments:  Spanish companies Unión Fenosa, Isolux and Abengoa/Endesa, Swiss company ABB, Canadian Transalta, Japanese Nissho Iwai and Marubeni, and Italian Techint.  The rest of the companies listed above have one investment each. 

Up until 2001, EDF of France had already invested one thousand million dollars in Mexico.  This is equivalent to the amount that the Inter-American Development Bank (IADB) lent to President Fox’s government this year to increase a program to fight poverty in Mexico under the program “Oportunidades”, formerly called Progresa.  The French company was granted a license this February for the Rio Bravo IV CCC, under the category of Independent Energy Producer (PIE), that will enter into operation in 2005 and will be under their control for the next twenty-five years. 

Fuerza Eléctrica del Noroeste, S.A. (Unión Fenosa) stands out as the Spanish company that profited the most from Franco’s dictatorial regime:  this company even named their CEO the “Count of Fenosa.” Unión Fenosa also stands out as the first foreign electric energy generating company in Mexico and insists that the national electric sector be left one hundred percent to the invisible hand of the “free market.”  One year ago, Fenosa had one thousand million dollars invested with the intention of increasing the energy produced from 1,000 MW to 4,000 MW.  Together with the company Cobra and the Israeli company IDET Technologies, they attempted to construct a water desalinization plant in the north of Mexico with an investment of greater than 260 million dollars. Fifty percent of all of it’s capital invested in Latin America is invested in Mexico, given that it also has investments in the airport sector with licenses to the 12 airports on the Mexican Pacific.  Unión Fenosa also controls the CCC Tuxpan II and IV in Veracruz as well as Naco Nogales in Sonora, as well as providing consultancy services to the Mexican Institute of Petroleum.  This company has been pushing for the privatization of the Central Light and Power (LFC) since 1997.  Union Fenosa also plans to install three hydroelectric dams in the future, that will possibly by in El Cajón, Copainalá and La Parota, each one with a capacity of 1,200 megawatt that imply an investment between 3,600 and 4,000 million dollars.  However, only the El Cajón dam has been officially announced in the list of licenses for this year. 

The Spanish company, Iberdrola, accompanied Spanish President José María Aznar on a tour of the CCC Monterrey III in July of 2001.  This CCC generates 500 MW of power with an investment of 272 million dollars.  Iberdrola seeks to invest four thousand million dollars in the next 4 years.  This company has invested years ago in the CFE in order to push along the Nuclear Electric center of Laguna Verde.  Since 2001, Iberdrola and Endesa have been discussing a merger. 

The economic journal La Gaceta from Madrid published an article in October, 2000, stating that the Spanish electric company officially presented it’s application for a license to the Ispat Mexican project for industrial clients in Veracruz on October 11, 2000.  This project has a capacity of 750 megawatts and brought the company back to first place as independent electricity generator in Mexico.  The company then developed the Monterrey project in Mexico, investing 502.8 million dollars in the two phases of the project.  It hoped to return to being the “largest private generator” in Mexico through this opportunity, after losing this position to it’s competitor, another Spanish company, Unión Fenosa. 

The Canadian company Transalta Energy Corporation was granted the license to construct the CCC Campeche in February 2000.  In March 2001 it was granted the project for the construction of CCC Chihuahua II in the north of the country, in order to generate 259 MW connecting to the National Electric System (SE).  Construction is scheduled to take 28 months in order to start commercial operations in May of 2003.  Then, Transalta entered into the national electric market under the category of Independent Energy Producer (PIE), with an investment of 408 million dollars.  The plants they construct will generate 511.4 MW, with a 25 year contract with the CFE. 

Bechtel (Intergen) has several thousand million dollars invested in Mexico.  This is the same company that convinced the Bolivian government to privatize the water in the city of Cochabamba.  This privatization caused protests, resistance and struggles that were violently repressed, until the community was able to revert the process of privatization and restore national control of water for the population.  This is, to our knowledge, the only case in the world where a community was able to reverse a privatization process of this magnitude. 

U.S. company Enron has done business in Mexico for 10 years with the commercialization of gas and other derivative products.  It’s main contracts of up to 15 years were with the Grupo IMSA, Vitro and Apasco.  Since 1999, Enron constructed a thermoelectric plant of 245 megawatts in the municipality of Villa de García in the northern state of Nuevo Leon.  More than 180 million dollars were invested in this project, financed by the Inter-American Development Bank, and the plant was to begin operating in January of 2002.  However, due to Enron’s mega-fraud and bankruptcy, in November of 2001 the Belgian company Tractebel acquired 80% of the shares.   Enron was the first energy distributor in the world with a volume of business of greater than 100,000 million dollars in 2000.  Enron will stop operating the plant at the end of this year, and Tractabel will provide energy to various companies of the Grupo Glaziera, and will provide steam to the subsidiary Industria del Alcali.  Tractebel is the third largest private business involved in gas distribution in Mexico.  Jean Pierre, Tractebel official, affirmed that, “We are the first company on a world level to offer natural gas and electricity services in a joint manner.”  Regarding the reform of the Mexican electrical sector, Jean Pierre stated, “It is not our job to define the rules for the governments.  We do not have experience as imperialists.  We take into account the countries.  It is not our work to define the best rules.”  However, Tractebel knows that the integration of the markets between Canada, the United States and Mexico, with Central America, and under the same rules that benefit the North American economy and the large transnationals, it will be the largest energy market in the world. 

El Paso Energy of Texas, part of the Total Energy Systems, currently has contracts with the CFE, and sells it more than 150 MW from the United States during the summer.  Total Energy is working with manufacturers in order to install three electric generating plants to supply the metropolitan zone of Monterrey, Nuevo Leon. After the deregulation of the electrical sector in Texas, El Paso Energy defrauded it’s users with inflated costs on consumption receipts, that now it is returning dollar for dollar to it’s clients. 

For it’s part, the Japanese company Mitsubishi with the CCC Tuxpan II will have partial control of the supply to the central-northern region of the state of Veracruz.   However, Japan has another type of participation conditioned through the Japanese Bank of International Cooperation (JBIC) given that it granted to Mexico it’s tenth line of credit for 20,000 million Japanese yen (approximately 157 million dollars) in July of 2001 to the CFE.   The CFE will use this loan to buy goods and services from the Japanese company, and will have to pay back the loan in June of 2005.  In other words, “I lend you money so that you buy from me.”  Fumihiko Wada, Executive Director of Latin America for the JBIC stated that the bank promises one of the largest amounts in history for a total of 2,200 million dollars since 1996, the year they granted their first loan to the CFE.  In this way, all of Vicente Fox’s six year term projects are leading to the signing of the FTAA in 2005 and to leaving the next presidential administration deeper in debt in 2006. 

The Swiss company ABB began construction of an electric energy plant to supply CEMEX and Peñoles in the state of San Luis Potosí in June of 2000.   This investment is completely private, without any kind of agreement with the Mexican government.  In addition, ABB acquired the rights to construct the CCC’s of Monterrey and Rosarito, in order to generate around 1,000 MW. 

There are other Mexican companies that supply the CFE, such as in the case of Altos Hornos de México (AHMSA) which supplies carbon.  AHMSA  has found itself in a position of suspension of payments, equivalent to making an illegal contract.  Therefore, it carried out the contract through a subsidiary in order to be able to guarentee their sales to the CFE for another 9 years, sales for which they receive 180 million dollars of public funds each year.  Tubos y Aceros de México (TAMSA) aims to construct in Veracruz an electric plant of 250 megawatts, of which 110 will for supply of self generated electric energy and the rest will be sold on the market. 

Due to the opening to the privatization process, countries such as Finland have shown interest in investing in Mexico, and so has the North American company Calpain. Meanwhile, German company RWB aims to supply energy to the Volkswagen factory in Puebla independently from the public network in order to reduce it’s production costs.  Meanwhile, U.S. company TECO Power Service will initiate the commercial transmission of electric energy from Texas to Mexico with 150 MW, following successful experiments in transmitting energy from the plant in McAllen, to three kilometers from the CFE substation in border city Reynosa in the state of Tamaulipas.  The sale could be directly to the companies or the CFE could resell to other clients. 

The Public Service Company of New Mexico (PNM) and Tucson Electric Power Company also hope to sell electricity to Mexico soon.  PNM aims to construct a transmission line of 345 volts in order to transmit between 800 and 1000 MW of electricity.  “We have been working to connect an important transmission project that will interconnect the U.S. western network with the Mexican national network,”  claims PNM spokesperson Julio Grey.  In this way, Mexican sovereignty is being dismantled at an ever increasing rate, with respect to electricity.   There is already an electrical energy network in place through which Mexico receives electricity dumping (at a lower cost due to U.S. subsidies to corporations), just as is occurring with agricultural products from the U.S.  The energy will also be used for the electricity networks of the Puebla Panama Plan.  We will examine this theme in another bulletin. 

Many of the businesses previously discussed have been denounced as human rights violators by those effected.  These companies have provoked displacements of the indigenous and rural populations, have fostered corruption by paying off governments, have inflated the price for electric energy, and their projects of investment in hydroelectricity have caused irreversible damages to the environment.  We will also analyze this theme in another bulletin.

To summarize, according to the Energy Regulating Commission (CRE), since 1994 when the NAFTA era began and when the Zapatista uprising occurred against this agreement and against neoliberalism, the federal government  has granted a total of 172 permits for electric energy generation to private companies, and eight permits for the importation of electricity for a capacity of nearly 18,000 MW (as of February 2002).  The loss of national sovereignty and the increase of dependence is clear:  we import 50% of corn and nearly 100% of other agricultural products, we import gas and up to 50% of the gasoline we consume.  Now, little by little, we will import more electricity.

At the beginning of 2001, official reports stated that of the 172 permits, 122 are for the purpose of self supply of energy for the companies with a capacity of generating 5,088 MW, 35 are for co-generation with a total capacity of 130 MW, and 15 permits under the category of External Energy Producers with a total capacity of 82,112 MW.  At the same time, the Federal Government affirmed that thanks to the legal reforms made in 1994 that permitted the participation of national and foreign private investment in the electric sector, as of January 2002 a total of 204 official permits had been granted to private companies.  These permits allowed companies to develop projects that have implied investments of 9,966 million dollars, establishing an installed capacity of 18,313 MW in ways that were previously exclusively of the State such as co-generation, self supply, independent production of energy and importation.  One of the government’s justifications for these privatizations is that private investment would be promoted, “as a complement to public resources, and within the proper legal framework.”

Some investment projects dealing with the flooding of ejidal (communally owned) lands, construction of roads or cables that imply the expropriation or sale of lands, lead to the expulsion of the indigenous and campesina population from their places of origin.  This is happening already with the megaprojects in the South Southeast.    Therefore, for the political elite, the Constitution of the Republic means nothing:

“The following are declared null and void:

1. All transfers of the lands, waters, and forests of villages, rancherías, groups, or communities made by local officials (jefes políticos), state governors, or other local authorities in violation of the provisions of the Law of June 25, 1856, and other related laws and rulings.
2. All concessions, deals or sales of lands, waters, and forests made by the Secretariat of Development, the Secretariat of Finance, or any other federal authority from December 1, 1876 to date, which encroach upon or illegally occupy communal lands (ejidos), lands allotted in common, or lands of any other kind belonging to villages, rancherias, groups or communities, and centers of population.”
   (Art. 27 of the Mexican Constitution).

However, if the government does not respect the law and the rights of the indigenous peoples, it will be autonomy de facto.  The pueblos will have to defend their lives, their lands, nature and the environment.  But it is not only their responsibility, but the responsibility of all Mexican citizens with some consciousness and common sense, from wherever we are, to contribute to the struggle.

Sources: Comisión Federal de Electricidad (CFE); Alfredo Elías, President of the CFE; the Mexican Constitution; World Bank; CIEPAC; web pages of the businesses mentioned; Secretaría de Energía; Comisión Reguladora de Energía; La Jornada, Milenio, Crónica, Reforma, Economista, Excélsior, Novedades, Financiero, Heraldo, UnomásUno, Sol de México, Universal, Ovaciones and Prensa from December 2001 to February 2002, contained in the CFE’s newspaper summary; and the Institute of Geography of the Autonomous University of Mexico, Expansión and CFE quoted in the map elaborated by researcher Andrés Barreda (www.ciepac.org capitulo de “Mapas”).

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