Presidential Elections Approach While Energy Dispute Continues

The USMCA energy dispute that started in mid-2022 continues as Mexico’s 2024 presidential election draws nearer. Mexico seeks to resolve pending consultations through the "conciliatory route," as reported by the Ministry of Economy (SE).

Tensions in the energy sector and political uncertainty present a challenging scenario for Mexico, as various sectors and state governments prepare to attract greater investment derived from nearshoring. The two main contenders for the presidency propose different approaches to managing Mexico's energy industry, although experts say both proposals represent a significant change compared to the current administration’s.

In the context of the third mid-term USMCA meeting held in Toronto, the Deputy Minister of Foreign Trade of the Ministry of Economy, Alejandro Encinas Nájera, held bilateral meetings with his North American counterparts. During these meetings, the representative of the Ministry of Economy addressed various aspects related to the implementation of USMCA, including the ongoing energy dispute.

The Ministry highlighted that the United States expressed its gratitude for Mexico's cooperation in the Rapid Response Labor Mechanism (MLRR). Encinas stressed that workers' rights are a priority for the Mexican government, emphasizing the salary policy of President Andrés Manuel López Obrador, as reported by the Ministry.

Encinas reaffirmed Mexico's willingness to resolve energy queries through conciliatory means. Both sides agreed to continue working closely to reach a mutually acceptable agreement. During the meetings, business representatives exchanged concerns with the aim of jointly seeking solutions. Encinas Nájera highlighted the historical importance of the relationship between Mexico and the United States, highlighting that both countries are fundamental trading partners for each other.

President López Obrador’s administration has put state-owned companies at the forefront of the energy sector, sometimes even reversing legal provisions derived from the opening of the energy market in 2013. This has led to PEMEX holding an 82% participation in the fuel market, after dropping to 76% in 2022. MORENA presidential candidate Claudia Sheinbaum said that if elected, she would continue with López Obrador’s electricity reform.

Contender, candidate Xóchitl Gálvez, has expressed more support for private participation than Sheinbaum. During a meeting with members of the American Society of Mexico, Gálvez pledged to provide legal certainty to investors. She promised to reestablish the openness in the energy sector that existed in the last administration. 

Despite the candidates’ opposite energy strategies, experts expect an important shift in the energy sector regardless of the candidate, as Sheinbaum’s background in supporting cleaner energy and more openness toward private participation show a shift against López Obrador’s policy.