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News Article

GM Voices Concern Over Mexico’s Energy Policy

By Cas Biekmann | Mon, 11/22/2021 - 15:11

Chief Executive Officer of General Motors (GM) Mexico, Francisco Garza, voiced his concern about renewable energy’s future in the country. Without a solid legal basis for renewables, GM and other leading companies will not reach their net zero goals. As a result, automotive investment would take a major hit.

Speaking at a convention organized by the Mexican Institute of Finance Executives (IMEF), Garza discussed how Mexico’s energy policy general direction could affect his industry. “Unfortunately, if the conditions are available, Mexico would not be considered a destination for investment, because the conditions that permit us to meet our objective of having zero emissions in the long term would not be present,” Garza said.

Reuters reported that GM is one of the companies that has invested the  most in Mexico following the signing of NAFTA in 1994. In April of this year, GM reported it planned to invest US$1 billion in Coahuila to manufacture electric vehicles (EVs). Nevertheless, if Mexico continues its push toward a state-centric energy sector, energy options such as 100 percent renewable supply from private producers would likely disappear. This could lead companies to move their business elsewhere. “We are evaluating that if the right conditions are absent, that dollar that was going to be invested in Mexico will go to the US, Brazil, China or Europe, and Mexico will no longer be a key destination,” continued Garza, adding that not only GM but “many other companies” shared a long-term vision toward a decarbonized economy. This vision would be an important factor in determining investment decisions. For GM, the goal is to have a 100 percent of the energy the company consumes across its global operations to be clean by 2040.

Following the comments, GM Spokesperson Teresa Cid explained to Reuters that the company was certainly not “threatening” to stop its investments plans in Mexico. “GM must meet its [net zero] vision and we must follow that path,” she said.

Much has been said about Mexico’s energy policy since the López Obrador administration took the presidency b in 2018 and began outlining a fundamentally different vision for the energy sector. Nonetheless, it has been relatively rare for major drivers of foreign direct investment (FDI) to speak out against the government’s policy in full detail.

This week, Fitch Ratings joined a growing group of industry experts arguing that there is a low probability that the government’s constitutional electric reform would pass as it has been presented to Congress. The proposal would require a two-thirds ‘supermajority’ to pass, whereas the ruling coalition occupies just over half of the seats in Congress. Recent developments seem to stack the odds further against López Obrador and its allies: where many opposition parties spoke out in direct opposition, the PRI had previously said it would wait until debates in 2022 to formalize its stance. Recently, the ruling coalition approved Mexico’s 2022 budget with none of the numerous changes the PRI requested. This move appears to have harmed ruling party MORENA’s chances of building bridges with the opposition party.

The data used in this article was sourced from:  
Reuters, Fitch
Cas Biekmann Cas Biekmann Journalist and Industry Analyst