Trump's Potential Return Could Complicate Energy Dispute

With Mexico's elections finalized and Claudia Sheinbaum elected, MORENA's "Plan C" is expected to materialize, potentially affecting various autonomous institutions and the energy sector. President López Obrador's Plan C aims to enshrine current government programs in the Constitution and implement reforms in the Judiciary, INE, and other autonomous bodies. Sheinbaum's potential nationalist energy policies and the existing energy disputes with the United States add complexity to the scenario, as the upcoming US elections signal the possible return of Donald Trump as president of the United States.

In her post-election speech, Sheinbaum outlined her vision, including reforms proposed by MORENA. The first agenda item is judiciary reform, which aims to prevent the Judicial Power from rejecting or reversing government reforms, as seen during López Obrador's administration, particularly in the energy sector.

Experts note that MORENA's potential qualified majority in Congress has caused uncertainty in the energy sector. López Obrador's plans to terminate autonomous regulatory bodies like the CRE, CNH, and COFECE are particularly concerning. The Mexican peso has already suffered losses following Sheinbaum's statements about constitutional reforms.

In the international scenario, the energy dispute between Mexico, the United States, and Canada remains a crucial topic in President Biden’s 2024 Trade Policy Agenda and 2023 Annual Report to Congress. With the US elections approaching, discussions are expected to continue. The USTR emphasizes efforts under USMCA to support American workers and protect US energy and agricultural interests, a priority for nationalist candidate Donald Trump.

The situation is further complicated by the scheduled USMCA renegotiations in 2026 under the sunset clause. The 2021 reform to the LIE and subsequent Supreme Court rulings have weakened Mexico’s position in the energy dispute, exacerbating concerns about Sheinbaum’s reform intentions.

Adding pressure to the discussions is the influx of Chinese investments in Mexico's automotive industry. According to Bloomberg Línea, Chinese investments weigh heavily on Mexico's relationship with the US. Since December, Mexico has been working on a national security investment selection framework to address US concerns. Canadian and Mexican officials believe trade negotiations would become more volatile and unpredictable if Trump returned to power.

Majority at Congress

It is anticipated that MORENA and its allies will collectively hold between 346 and 380 of the 500 seats in the Chamber of Deputies, which would give them a qualified majority to easily pass reforms. In the Senate, MORENA and its allies are anticipated to secure between 76 and 88 of the 128 seats, leaving uncertainty regarding whether they will reach a qualified majority. Nonetheless, experts emphasize that even if they fall short, they will likely seek alliances with the opposition to advance their agenda.