The Economist (2022-01-08)

28 TheAmericas TheEconomistJanuary8th 2022

energyministry,alongwithtwootherreg­

ulators.Ineffect,itwouldbeuptocfeto

decidefromwhichfirmstobuywhatever

supplementary power the grid required

andtodictateprices.Therewouldbenore­

quirementforauctionsoropentenders.

Theimpactofallthiswouldbe“cata­

strophic”,saysOscarOcampoofimco, a

think­tank. Mr López Obrador’s plans

threatenatleast $44bn­worthofprivate

generation,ofwhich$26bnisinvestment

inrenewables.Blackoutscouldfollow,as

cfemaynothavethecapacitytoproduce

enoughelectricitytomeetMexico’sneeds.

Eveniftherewasenoughofit,electricity

wouldinevitablybecomemuchmoreex­

pensive. cfespends atleast 40% more

thanitsprivaterivalstogenerateakilo­

watt­hourofpower.

Thegovernmentsaysblithelythator­

dinaryMexicanswillnotpaymoreforelec­

tricity.Ifitkeepsitsword,thestatewould

havetoabsorbtheenormousextracostsit­

self. cfe’s accounts have long been in

dreadfulshape.Analystsreckoncfewould

needtospendatleastanextra62bnpesos

($3bn)ayear to generate thepower re­

quired,nottakingintoaccounttheneed

fornewinvestmentingenerationorsubsi­

diestoholddowncoststoconsumers.

MrLópezObradormayshrugatthat.

Afterall,PetróleosMexicanos(Pemex),the

state­ownedoilcompany, isthe world’s

mostindebtedenergyfirm,withborrow­

ingsof$115bn.Thegovernmentispropping

itup withcash handouts equivalentto

1­2%ofgdp. Itisalsowinningtaxbreaks:

theroyaltiesitpaysontheoilitextracts

willfallfrom54%to40%(whichisstill

highcomparedwithBrazil’s15%rate,for

example).Theamountthegovernmenthas

earmarkedforPemexinthisyear’sbudget,

778bnpesos,ismorethandoublewhatit

planstospendoneducation(364bnpesos).

Thereislittleimminentprospectofei­

thercompanyreturninganyprofitstothe

state.Pemexalreadystrugglestocoverin­

terestpaymentsonitsdebtandroutine

capitalexpenditure,letalonemakebigin­

vestmentsinexplorationandnewproduc­

tion.Itsoutputhasfallenfroma peakof

3.5mbarrelsa dayin 2003 to1.7mtoday.If

privatecompaniesaresqueezedoutofex­

ploration—another elementofMrLópez

Obrador’s energy policy—Pemex will no

longerbenefitfromtheirexpertise,capital

andrisk­sharingonnewprojects.InDe­

cemberPemexsaidit wouldhaltexportsof

crudein2023,tosteermoreoiltoitsrefin­

eries.Butthosecurrentlylosemoney.

Thenationalistturnfortheenergyin­

dustry is not just badfor the books. It

meansthatMexicowillnotmeetitspledge

to produce35%ofelectricityfromclean

sources by 2024—a target that analysts

reckonit couldexceed,thankstoitssunny

andwindyclimate.Thecountry’senergy

mixisdominatedbyoilandgas,withnatu­

ralgasthemainsourceforelectricity(see

chart2).Thetypeoffueloilusedinsomeof

cfe’s plantsis sodirtythatitsuse was

bannedininternationalshippingin2020.

Worse,ifenergycostsriseandsupplies

becomeuncertain,manufacturerssaythey

maynolongerfindMexicoa competitive

placetomakethings.GeneralMotors,an

Americancarcompany,hassaiditwillnot

investfurtherinMexicoifthelawsdonot

encourage clean energy. Other multi­

nationalsaresimilarlywary.

Thenthereisthedamagetothecredi­

bilityofthestate.“Theyarechangingthe

rulesofthegameastheygoalong,”com­

plainsLuisCházaro,a lawmakerfromthe

PartyoftheDemocraticRevolution,which

isinopposition.Thelawwouldretroac­

tivelycancelcontracts,whichmightbeas

alarmingtoinvestorsashigherpowerpric­

es.Theproposedchangeswouldalsoprob­

ablybreachseveraltradedeals,including

thatwiththeUnitedStatesandCanada. In­

deed,theelectricitybillsignalsthe“retreat

ofMexicoaspartoftherules­basedinter­

nationaltradeorder”,saysMrOcampo.

MrLópezObradormaystruggletoget

theamendmentsapproved,sincehewill

havetowinoversomeoppositionvotesto

attainthenecessarytwo­thirdsmajorityin

bothhouses.Butevenif watereddown,his

planswouldbedamaging.Andevenifthe

amendmentsfounder,hewillcontinueto

pursuethesamegoalsthroughordinary

legislationandadministrativefiat.

Muchdamagehasalreadybeendone,

reckonsMontserratRamiro,a formercom­

missionerattheelectricityregulator.The

president has stuffed energy regulators

withallieswhodelaypermitsforallfirms

but cfe andPemex. (LuisBravo ofcfe

countersthattheregulatorsareredressing

yearsofbiastowardstheprivatesector.)In

JulyMexico’staxagencybarredmorethan

50 companiesfromimportingpetroland

other refined products, purportedly to

crackdownontaxevasion.Twomonths

lateritrevokedorfailedtorenewimpor­

tantpermitsforTrafigura,a Swissenergy

trader,andWindstar,anAmericanone.

The fightagainstthepresident’spro­

posalswillbethe“motherofallbattles”,

saysOdracirBarqueraoftheBusinessCo­

ordinatingCouncil,a private­sectorlobby

group,giventhearrayofcompanies lined

upagainstthem.If MrLópezObradorwins,

ordinaryMexicanswilllose.n

Powerlines

Mexico,electricityprices,pesosperkWh

Sources:CRE;IMCO

1

3.0

2.5

2.0

1.5

1.0

0.5

0

2016 17 18 19 20 21

FederalElectricity

Commission

Wholesaleelectricitymarket

Gas guzzler

Energy consumption, 2019, % of total

Source:EIA

2

Nuclear

Hydroelectricity

Renewables

Coal

Natural gas

Petroleum and

other liquids

50403020100

Mexico Brazil

Brazil

Bolsonaryo v Lulo

W

hen felipe rosa, a softly spoken 11­

year­old  from  São  Paulo,  got  bored

playing  “Minecraft”,  a  video  game,  he

downloaded  a  new  game,  “Kandidatos”,

that  went  viral  when  it  was  released  in

2020.  The  game  involves  hand­to­hand
      combat  between  Brazilian  politicians,  in­
      cluding  “Bolsonaryo,”  who  looks  just  like
      Jair  Bolsonaro,  the  right­wing  president,
      and “Lulo,” a carbon copy of leftist ex­pres­
      ident  Luiz  Inácio  Lula  da  Silva.  Rudimen­
      tary graphics and symphonic rock accom­
      pany  their  grunts,  punches  and  kicks.  Mr
      Rosa was delighted. “It’s the crudeness that
      makes it cool,” he says. 
      Gabriel  Nunes,  the  game’s  creator,  has
      been designing video games for over a de­
      cade but “didn’t make a cent before ‘Kandi­
      datos’”.  It  was  downloaded  50,000  times
      the week it launched (for $0.99 on Steam,
      an  online  shop).  It  has  now  been  bought
      some  170,000  times.  Hyped  online,  occa­
      sionally by famous gamers, it joins a grow­
      ing  number  of  meme­like  games  by  inde­
      pendent  developers  in  Brazil  whose  main
      purpose is to mock politics. At least a doz­
      en have hit the market in recent years.
      This  reflects  not  only  the  occasionally
      farcical nature of Brazilian politics but also
      the history of video games in the country,
      home  to  the  world’s  fifth­biggest  popula­

S ÃO PAULO

A divisive political culture finds

expression in video games