The New Legal and Regulatory Framework of the Mexican Electrical Sector: Possibilities of Inclusion of Small and Medium-sized Companies
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The Rule of Law, Guarantor of Economic Development
According to the annual Rule of Law Index, in 2014, Mexico was ranked 79 out of 99 countries; the most concerning aspects of its legal-institutional fabric are corruption and the lack of adequate security and civil and criminal justice systems. The ongoing criticism of the lack of the rule of law in Mexico makes it necessary to reflect on the causes and consequences of both the ineffective design of the law and citizens’ noncompliance. The rule of law exists when the individuals or entities who make up a society are governed by—and subject to—the full force of the law in all their activities; in other words, a solid rule of law exists when a country is governed by the law and not by human beings. It is important to point out that all countries have a rule of law; however, there are weak states and strong states. When the rule of law is strong, according to Hayek, the laws and the State mechanism to ensure compliance with them are aimed at achieving legal security (González de Cossío 2012, 2). One of the greatest contributions by Hayek in this respect is that he questions the relationship between the rule of law and the free market from the perspective of an economist. According to Hayek, under a strong rule of law, individuals enjoy conditions that are appropriate for making predictions and intelligent decisions with respect to their investments, trusting that they will enjoy successful yields on their capital (Hayek 1944, 81).
In addition to Hayek, economists Samuelson, Nordhaus, Wolf, and Adam Smith agree that the economic goal of the State must contemplate the correction of market failures, establish goals of fairness through public policies, and achieve rates of macroeconomic growth and stability. In other words, contemporary thought subscribes to the view that the rule of law is a primordial element to create wealth and welfare, and that it will work to the extent that public goods are provided, negative externalities such as contamination and waste of resources are mitigated, clear rules are established, and a system to seek effective justice is implemented. Defining each of these characteristics is not the purpose of this essay. However, I do believe it is paramount to briefly restate the essence of what makes the rule of law functional and relevant for a working economy. A rule of law that combines these characteristics represents the key element in the wealth of nations.
This essay includes a summary of the reform, emphasizing the concept of “national content” as the clearest expression of the legislation’s intent to include small and medium- sized companies (SMEs). Afterwards, I address the competitiveness of SMEs, which poses challenges to their inclusion in the production chain, as well as the new opportunities renewable energy technologies1 offer for these types of companies to join the electricity generation system. Next, I summarize the implications of public policy that will affect the companies’ participation in the electrical market, using the example of the Brazilian case in terms of implementing the “national content” concept in its legal framework. Finally, I present some conclusions regarding the viability of the new legal framework to include SMEs and, in particular, whether such inclusion is reasonable and relevant for strengthening the rule of law in Mexico.
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