Canada Exerts Diplomatic Pressure Against Energy Reform
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Canada Exerts Diplomatic Pressure Against Energy Reform

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María José Goytia By María José Goytia | Journalist and Industry Analyst - Mon, 04/11/2022 - 08:59

Pressure from North America on the Mexican energy sector is mounting, as Canada joins the US in its stance against the new Mexican energy reform. After US officials communicated their concerns to the Mexican government, Canadian Prime Minister Justin Trudeau spoke with President López Obrador on April 5 about the relevance of Canadian investment to the Mexican economy.

"They discussed the important contributions that Canadian investors make to the Mexican economy, including the energy sector. They agreed to continue working together to counter climate change," reported the Canadian government's official statement.

During the call, Trudeau also invited López Obrador to participate in a day of support for refugees impacted by Russia's invasion to Ukraine. Mexico's middle-of-the-road stance on the Ukrainian conflict has also been a deviation from its North American partners.

As the vote in Congress nears, lobbying efforts by the US and Canada against the energy reform have become more prevailing, primarily highlighting the potential violation to USMCA. Canada’s Ambassador to Mexico Graeme Clark commented on the friction generated by the energy reform in Mexico's relationship with its North American partners during the Mexican Private Equity Association (AMEXCAP) summit, describing it as an "irritant." Clark also noted that, if necessary, USMCA ensures effective dispute resolution mechanisms that protect foreign investment in the region.

Canadian investment in Mexico's energy sector is equivalent to US$10.4 billion, of which US$4 billion went to renewable energy. In addition, Canada is a relevant economic stakeholder in the Mexican mining and manufacturing industries.

The Canadian push for investment protection comes days after President Lopez Obrador's meeting with US Climate Envoy John Kerry and strong statements by the US Ambassador to Mexico, Ken Salazar, and US Trade Representative Katherine Tai about the risk to foreign investment should the Mexican Congress approve the energy reform.

Mexico's economy is largely integrated in the North American region. The uncertainty in the energy sector for the country’s the most important trading partners could have serious consequences for the Mexican economy. In April, the World Bank adjusted Mexico’s growth forecast, as it highlighted the need for a more even floor to take advantage of its enormous green energy potential. Mexico’s expected growth for 2022 went down from 3 percent to 2.1 percent. For 2023, the new forecast is 2.1 percent and for 2024 it stands at 2 percent.

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