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Officials Use USMCA to Put Pressure on Mexico’s Energy Policy

By Anamary Olivas | Mon, 07/11/2022 - 21:27

Officials from Canada, Mexico and the US reunited this past Friday in Vancouver, Canada, on the eve of the USMCA’s second anniversary, to discuss Mexico's recent energy policy and labor issues stemming from President López Obrador’s effort to nationalize the country's energy sources.

 

Working toward the opposite of his predecessor Peña Nieto’s strategies, the president has bet on reinforcing state companies PEMEX and CFE instead of furthering privatization. Several complaints have been filed by US companies and their government regarding business in Mexico, citing unfair economic competition, especially in the energy sector. The claims are meant to push Mexico to adopt corrective measures toward its implementation of the free trade agreement, as the US and Mexico continue their democratic efforts to avoid the arbitrations.

 

As a result of this, a letter was sent by US attorneys, directed to Mexico’s Minister of Economy, Tatiana Clouthier. The letter read that US companies are facing arbitrary treatment and that more than US$10 billion dollars of investment is in danger. It also raised concerns with Mexico about the country's investment climate and its treatment of US investors, which is allegedly affecting the energy industry in the southeastern United States.

 

US Trade Representative Katherine Tai pointed out that her office is studying the evolution of the decisions made by López Obrador in energy matters. Recent effort of the president include a series of actions to increase state control and limit competition in the energy sector, as well as attempts to change the Electricity Industry Law. Tai stated that "Mexico's energy policies harm the environment, US companies and the interests of investors in multiple sectors, and hinder joint efforts to mitigate climate change."

 

These fears and claims may be weakening Mexico’s image by undermining investor confidence, say experts, who add that measures come at the expense of the environment and US fuel exports. They furthermore hurt efforts to improve North America's competitiveness, the main goal of the USMCA. Credit rating agencies such as Moody's recently qualified Mexico's fiscal incentives poorly. “Its strength will be affected in an increasing way by greater rigidity in public spending, associated with government support for state-owned companies such as the oil company PEMEX,” said Moody's.

 

Many analysts agree that both countries must strengthen capacities to protect the environment while promoting trade and investment in the renewable energy sources that will support the fight against climate change. López Obrador has been facing pressure to redirect his energy policy.

 

 

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Anamary Olivas Anamary Olivas Journalist & Industry Analyst