(Bloomberg) -- Mexico’s Senate on Thursday approved contentious legislation that would eliminate autonomous government watchdogs, including two regulating antitrust issues and the nation’s energy industry, with their functions absorbed by existing ministries in the federal government.

Earlier this month, the lower house of Congress passed legislation proposed by former President Andres Manuel Lopez Obrador, turning the Senate into the last major hurdle for the initiative. 

Lopez Obrador presented the proposal as part of an effort to slim down the federal government and deliver on the ruling party’s austerity pledge. The legislation has met with pushback because of the perception it could undercut regulators’ independence and their role in checking government power.

The bill would eliminate the transparency institute (INAI), the antitrust regulator (Cofece), the telecommunications watchdog (IFT), the energy regulator (CRE), the hydrocarbon regulator (CNH), the commission for oversight of education (Mejoredu) and the council to evaluate social policies (Coneval). Antitrust efforts would be overseen by a decentralized agency in the Economy Ministry.

President Claudia Sheinbaum and the ruling Morena party pushed for the reform, as part of a slate of changes the former president proposed before leaving office. The party holds the vast majority of seats in state legislatures, which all but guarantees that the bill will be passed into law in the coming days.

Economy Ministry officials have stated the legislation would not violate the North America free trade agreement, known as USMCA. They insist that the oversight body that acts against monopolistic practices will operate with independence under government auspices. The Energy Ministry and Agency for Digital Transformation and Telecommunications will take on some of the tasks.

“The proposals include having a competition entity that corresponds with the trade agreement, that resembles the United States’ and that above all guarantees good competition,” said Vidal Llerenas, undersecretary of industry and trade in Mexico’s Economy Ministry.  

The free trade agreement is scheduled for review in 2026 but that process is already mired in uncertainty because of President-elect Donald Trump’s threats to impose tariffs. 

Economy minister Marcelo Ebrard said earlier this week that the announced tariffs would cost the US economy 400,000 jobs and mainly hit US automotive companies operating in Mexico. 

Mexico is preparing a defense with a group of national businesspeople as it also looks to strengthen relations with the European Union and Brazil. 

The Morena Party has called for less US intervention in Mexican affairs, but the trade pact that is the basis for Mexico’s exports with the US — its top trade partner — can be turned into an easy cudgel.

Morena’s lawmakers have argued the changes will reduce public spending and help weed out corruption. Critics have said that the changes would and cast uncertainty over how the private sector will partner with Mexico’s large state energy firms and raises doubts about the government’s true transparency.

“Transparency has to be there and it’s one of the substantive obligations of government: accountability, transparency and the protection of personal data. What won’t happen is that there’ll be billion pesos set aside to do it,” said Sheinbaum at her daily press briefing on Nov. 21 at the National Palace.

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