State ownership in liberal economic governance? De-risking private investment in the electricity sector in Mexico

Abandoning some neoliberal reform tools, but not the goals, liberal policymakers have devised forms of economic governance to support private investment through, paradoxically, the use of state-owned enterprises (SOEs). The article builds on a pragmatist perspective of institutional evolution by describing the syncretism in Mexico's 2013 electricity reform as an exemplary case of structural reforms for de-risking investment through the strategic use of the national SOE. The case shows that the technical and legal segmentation of electricity supply can accommodate different risk distribution arrangements in which state ownership is useful to (1) rein-in the capacity of the dominant company to exercise market power, (2) shoulder the costs of maintaining a subsidised tariff structure for retail consumers, and (3) underwrite the expansion of infrastructure with an uncertain economic future. Structural reforms can use SOEs to relocate private risk in the state's ledger and making state de-risking the most important mechanisms to drive investment, and not market competition. The article argues for the need to develop a sector-specific understanding the role of SOEs within liberal economic programs, but also the need to develop a critical perspective, for instance, through Daniela Gabor's Wall Street Consensus concept, to focus on the historical distributional consequences of these arrangements which can result in the progressive private control over the electricity sector.