Did Mexico’s AMLO Government Just Blink in Standoff With Global Energy Lobbies?

Washington finally makes its feelings known on Mexico’s dream of energy independence. 

With Mexico’s government threatening for the last three years to drastically dial back the privatisation and liberalisation of its energy market, it was only a matter of time before its big neighbour to the north made its feelings known on the matter. That moment arrived last Wednesday (Nov. 3) when 40 Republican lawmakers urged the Biden administration to pressure Mexico over what they called discriminatory actions that risk harming U.S. energy companies. In a letter sent to the Departments of State, Energy and Commerce, as well as the U.S. Trade Representative, they argued that Mexico’s plans violate the terms of the U.S.-Mexico-Canada trade agreement and called for “a timely and clear response” to the threat.

“His administration and his party have championed regulatory and legislative efforts that have been ruled to be anti-competitive and harmful to the environment by Mexican courts,” the lawmakers wrote in the letter. “As such, they are also harmful to U.S. investment, American workers and the North American commitment to sustainability — all of which are concepts that are protected by the USMCA.”

The response was timely and clear. On the very same day the letter was sent, the U.S. Ambassador to Mexico, Ken Salazar, met with representatives of the Mexican government at Mexico’s Palacio Nacional. After the meeting Salazar tweeted the following message: 

I had important meetings with the Mexican government to discuss the reform of the power sector. I want to learn more about the impetus for the proposed constitutional reform. I also expressed serious concerns for the United States. We committed to continuing our dialogue on these critical issues.  

The very next day (Thursday, Nov. 4), Mexico’s ruling political party, Morena, and its allies in the lower house of Congress agreed to postpone the vote on the electricity reform until April, due to lack of support among lawmakers. Morena’s leader in Congress, Ignacio Mier Velazco, denied that the delay in voting on the project was due to the pressure exerted by the US Republican lawmakers or Ambassador Salazar’s visit to the National Palace last Wednesday. He also insisted that there would be no expropriations resulting from the proposed reform and that its provisions do not violate the terms of the U.S.-Mexico-Canada trade agreement.

The reform, sent to Congress on October 1, is one of the cornerstone policies of President Andrés Manuel López Obrador’s six-year term. But now it will have to wait. 

López Obrador (AMLO for short) insists the reform is necessary to guarantee energy independence for Mexico as well as low gas and electricity prices for the future. But for the bill to pass, it needs a two-thirds majority vote since it requires altering the constitution. Morena has a relative majority of just 40% of Congress and will need the support not only of its allies but also the former ruling Institutional Revolutionary Party (PRI), which for the moment is not forthcoming.

The energy reform package seeks to roll back the privatisation and market liberalisation policies of previous administrations. If passed, it would amend Articles 25, 27, and 28 of the Constitution as a means of consolidating the role of the public Federal Energy Commission (CFE). As a result, the CFE would become an autonomous legal entity, no longer hamstrung by the subsidiaries and commissions created in recent decades. The CFE would also control the production of at least 54% of the nation’s energy supply.

The proposed reform also stipulates that lithium and other minerals considered strategic for the nation’s energy transition should be controlled by the state, which would possess sole exploration and mining rights. In including this provision, writes Kurt Hackbarth in Jacobin, AMLO “elevated the ongoing scuffle between the public and private energy sectors to the level of a historic battle.”

But his adversaries include some of the world’s biggest energy companies. Many of them are in the U.S., Mexico’s biggest trading partner. And that trading partnership is not remotely one of equals. A staggering 82% of Mexico’s exports go to the U.S. That’s similar to the level of dependence that the Cuban economy had on its trade with the Soviet Union at the height of the Cold War. Thanks largely to NAFTA, Mexico is also dependent on the U.S. for imports of staple foods such as corn and beans as well as gasoline, though AMLO is determined to change that.

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