Image credits: Ambassador Ken Salazar on Twitter
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News Article

US Business Leaders Voice Energy Reform Concerns

By María José Goytia | Fri, 04/01/2022 - 12:23

US business leaders continue to voice their concerns regarding Mexico's energy policies. During a virtual meeting in Washington D.C., the US Trade Representation (USTR) raised the alarm regarding the direction the Mexican energy sector is taking and the detailed analysis it is giving to the situation within the framework of USMCA. Meanwhile, further comments arose at the annual meeting of the American Chamber of Commerce of Mexico (AmCham), attended by the US Ambassador to Mexico and by the Minister of Economy.

On March 25, US Trade Representative Katherine Tai met virtually with legislators, business leaders and environmental associations to discuss recent shifts in Mexico's energy policy, the consequences for US investment and the impact of Mexico's behavior regarding the violation of its commitments under USMCA.

The meeting was also attended by Congressman Kevin Brady, Head of the Arbitration Committee, US Congress, and Congresswoman Verónica Escobar, Representative from El Paso, Texas. Non-profit environmental organizations and business chambers also joined the reunion.

Ambassador Tai started the discussion by noting the Trade Representation's serious concerns with the deteriorating path of the Mexican energy policies, which include multiple actions by the Mexican government guided to increase state control over the energy sector at the expense of free competition. "These actions are undermining investors’ confidence in Mexico at the expense of the environment. They are also restricting US fuel exports and harming efforts to improve North American competitiveness, as the US government seeks to implement USMCA more fully to meet broader environmental and climate goals as a region," Tai warned.

US companies present at the meeting shared with Ambassador Tai their dissatisfaction and concerns with the continued delays in permits for renewable energy facilities and sudden closures of energy terminals near the US-Mexican border, previously reported by MBN.

Later, on March 28, AmCham held its 105th General Members’ Assembly. The chamber brings together more than 1,000 transnational companies of US origin that represent around 21 percent of Mexico’s GDP and 2.5 million jobs.

Vladimiro de la Mora, AmCham president and CEO of General Electric Mexico, called for investment certainty. "Mexico needs to concentrate efforts on maintaining and attracting more investment. It is as simple as that: without additional investment, there will be no additional growth nor additional employment." De la Mora also commented on the private sector's intention to invest in Mexico and boost the country's economic development. "We have many resources available to achieve this goal, but without confidence conditions for investment, we will miss the opportunity to position ourselves as a strategic and secure destination in this new era of global trade competition."

The US Ambassador to Mexico, Ken Salazar, also attended the event. During his participation, he emphasized that the economic success achieved by both countries in economic matters should be extended to other areas, such as energy, security and migration, where both governments should coordinate to obtain better results in these areas.

Ambassador Salazar highlighted the frictions that the energy reform has generated in the bilateral relation, commenting that the energy reform issue is difficult: “I do not know how we are going to end up. As I have explained to Mexico's cabinet, if we are going to succeed in our economic partnership, we also need to integrate our energy: the region requires clean, reliable and affordable energy."

Minister of Economy Tatiana Clouthier was also invited to the meeting. In her message, she noted that, although the energy reform has generated doubts and fears, she trusts that "common ground will be found," as what happened with the outsourcing reform. Clouthier also highlighted President López Obrador's promise of not approving anything that would harm the bilateral relationship. "The President was clear with the US Secretary of Energy [Jennifer Granholm]. He told her that we are not going to do anything that puts our relationship into question. If this was the embodied commitment, I think we can navigate the details and achieve a reasonable conclusion," Clouthier said.

Even though the US is one of the main investors in electricity in Mexico, with US$2.44 billion invested throughout the last 20 years, its capital injection has drastically reduced since 2021. According to data from the Ministry of Economics, the US reduced 90 percent of its capital injection in the electricity sector in 2021 when compared to its peak investment figures of 2018. The dramatic downfall is strongly related to President López Obrador’s nationalistic approach to the energy sector and the uncertainty it has generated over private investments, according to experts.

Concern peaked when President López Obrador asked deputies in Congress to approve the energy reform without any modifications, as it is the only way to guarantee the strengthening of CFE over the private sector. In response, during the installation of the US-Mexico Friendship Group in the Mexican Congress, the US Ambassador to Mexico, Ken Salazar, encouraged deputies to respect the contracts signed by companies in the energy sector following the laws in force, while warning that "if there is no trust, there will be no investment."

The data used in this article was sourced from:  
El Financiero, Forbes, El Economista, Mexico Business News, Milenio, El Universal, El Sol de México.
María José Goytia María José Goytia Journalist and Industry Analyst