Freeman Spogli Institute for International Studies Program on Energy and Sustainable Development Stanford University


Private Power Production in Mexico: A Country Study

Working Paper

Ale Nunez

Issued by
Program on Energy and Sustainable Development Working Paper #47, August 17, 2005

Exploring the Mexican experience in independent power production is relevant for several reasons, all of which ultimately converge in the State's ownership of energy assets as a historically relevant characteristic of the Mexican economy. Specifically in the context of IPPs, in the face of old constitutional constraints that have made -and continue to make- restructuring difficult, during the last decade Mexico has enacted creative regulatory frameworks in an effort to attract foreign investment while avoiding constitutional limitations. Through such mechanisms, particularly statutory norms providing for pseudo-independent power production and a special financing arrangement designed to reduce payment and currency risks to investors, the country has enabled an attractive piece-meal approach to reform both through statutory legislation and the contractual experience in the context of IPP projects. However, the analysis of the stakes involved suggests that further flexibility is required as these frameworks might be reaching exhaustion.