US Clean Power Association Warns of Constitutional Reforms Risks

The American Clean Power Association (ACP) has raised concerns regarding proposed constitutional reforms in Mexico, which could negatively impact clean energy development and strain trade relations between Mexico and the United States. These reforms, likely to be addressed in Mexico's upcoming legislative session starting on Sept. 1, 2024, are viewed as a potential threat to investment stability and could violate USMCA.

In a letter, the ACP, alongside other major US industry associations, including those from the technology, manufacturing, and services sectors, communicated their apprehensions to US Secretary of State Antony Blinken. The letter highlights that the proposed amendments could destabilize trade relations and undermine the upcoming 2026 USMCA review.

Proposed reforms include significant changes to the country's regulatory framework, particularly targeting autonomous agencies. Among the most controversial proposals is the potential dismantling of CRE, with its responsibilities potentially being transferred to SENER. This move is seen as part of a broader effort to centralize power within the executive branch, which could erode the regulatory independence crucial for maintaining a competitive energy market.

The associations express alarm over the possibility of institutionalizing preferential treatment for state-owned companies, such as CFE and PEMEX. Such policies could severely restrict private sector involvement in Mexico's energy sector, a move that the ACP argues would "severely damage investor confidence and stall progress toward a cleaner energy future."

Proposed reforms are seen as a significant shift in Mexico's energy policy, with potential consequences that extend beyond the energy sector. The ACP's letter warns that these changes could harm US and Canadian investments in Mexico, which totaled US$34 billion in the energy sector alone.

The concerns expressed by the ACP are not limited to energy policy. The letter also outlines potential violations of USMCA, particularly in relation to market access, competition policy, and state-owned enterprises. Proposed restrictions on private investment, coupled with the prioritization of state-owned companies, could breach USMCA's provisions, leading to legal disputes and economic disruptions.

ACP's warning comes at a critical time, as Mexico prepares for the 2026 review of USMCA. The organization is urging the Mexican government to reconsider its approach and ensure that any constitutional amendments align with international commitments. "A stable and predictable policy environment is crucial for attracting the investment needed to develop clean energy projects and achieve climate goals."

As Mexico's legislative session approaches, the ACP and other industry groups are calling for a more deliberate and cautious approach to implementing these changes. The potential long-term impact on Mexico's investment climate and its ability to fulfill its international obligations remains a significant concern for stakeholders across North America, they argue.