US Officials Object to Mexico’s Energy Investment Barriers

Three officials from Donald Trump’s administration have issued a formal letter to the Mexican government regarding blocked investments in the private energy sector. Impediments have damaged Mexico’s “investment climate” and breach the USMCA agreement, claimed Secretary of State Mike Pompeo, Secretary of Energy Dan Brouillette and Secretary of Commerce Wilbur Ross, according to Reuters.

The letter that dates from Jan. 11 is addressed to Rocío Nahle, Minister of Energy; Marcelo Ebrard, Minister of Foreign Affairs and Minister of Economy Tatiana Clouthier. It warns that several actions taken by the Mexican government could risk millions of dollars in investments. The officials have paid close attention to López Obrador’s alleged instructions for regulators to block permits for private producers in favor of state-owned PEMEX and CFE. “If true, this would be deeply troubling and raise concerns regarding Mexico’s commitments under USMCA,” the letter reads.

In October 2020, Reuters reported that 40 US lawmakers wrote a letter to President Donald Trump expressing concern over this situation. Private energy investment has been under much debate since López Obrador’s administration came into power. The previous administration enacted the 2014 Energy Reform, allowing private companies to enter the Mexican energy market and compete with PEMEX and CFE. López Obrador has often criticized the reform, arguing that it mostly fostered corruption and unfairly weakened the state production companies. Since the start of his administration, various steps have been taken to “level the playing field,” even though these measures have been met with amparos. Most recently, CFE stated that CENACE had asked it to reduce renewable energy participation to the grid during low demand. The state utility pointed toward private renewable production as the main culprit for a blackout that left 10.3 million Mexicans without power in late December.

Nahle responded to the letter on her Twitter account, highlighting that “within the framework of its powers, the government of Mexico implements an adequate energy balance within its national territory.” “The relationship with the US within USMCA regarding energy matters is one of respect for the constitutional norms of each country, as specified in the treaty,” she added.

Reuters reported that Mexico could bring up the issue of anti-dumping barriers against its agricultural exports to the US should Mexico’s criticized energy policy is negotiated with the US, said Minister of Economy Tatiana Clouthier. “It means we keep talking within the framework we signed, the free trade agreement, and negotiating about our differences,” Clouthier said.

The US officials will leave office this week as Joe Biden enters office. The question now shifts to how Mexico will relate to the incoming administration. Biden has committed to an ambitious national energy transition plan, requiring US$2 trillion in investment. Even though a minimal Congress majority and a Republican-dominated Supreme Court could obstruct these plans, MBN experts highlight that Biden could still try to influence the international sphere. “Biden will therefore focus on his international agenda, where he has a freer mandate that does not depend on so many internal regulations. He will attempt to make the US’ trade partners, including India, Mexico and Canada, adjust to his policies and leadership. The first areas where he will make changes is in methane emissions, CO2 and mercury from cars, airplanes and boats. This will immediately send a strong message to the world,” said Ramón Basanta, CEO of ATCO Energía, to MBN.