US$10 Billion of Renewable Investment at Risk: Katherine Tai
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US$10 Billion of Renewable Investment at Risk: Katherine Tai

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María José Goytia By María José Goytia | Journalist and Industry Analyst - Wed, 04/13/2022 - 11:40

Amid the vote on the energy reform in Congress, the Biden administration increased its political pressure on the Mexican government regarding open competition in the energy sector. The US Trade Representative, Katherine Tai, wrote a letter to Mexico’s Minister of Economy, Tatiana Clouthier, with a sharper tone regarding the high-risk US renewable energy investments face under the reform.

In the letter written to Clouthier, Tai complained about the arbitrary treatment US companies are facing in the Mexican energy sector, leaving over US$10 billion in investment “more at risk than ever.”

The letter follows a roundtable discussion in late March convened by Tai at Washington DC with US Congress representatives, environmental NGOs, business associations and US companies. In the forum, participants shared serious concerns about the deteriorating trajectory of Mexico’s energy policy.

According to these US stakeholders, Mexico’s policies include chronic permitting delays for renewable energy installations and abrupt closures of numerous fuel terminals near the US border. In the letter, Tai mentions that “participants noted that these developments are weakening investor confidence in Mexico, at the expense of the environment, restricting US fuel exports and damaging efforts to enhance North American competitiveness as the US government seeks to more fully implement the USMCA and meet broader climate goals.”

Even though the Mexican president has repeatedly stated his energy reform is not against USMCA guidelines, Tai rejected such a position, specifying to Clouthier that “the US has also been very clear that the USMCA applies to Mexico’s energy sector.”

The letter also clarifies the US position regarding the protection of its investment and economic interests, as Tai highlights that her office is considering “all available options under the USMCA” to address American concerns and fully implement the free trade agreement guidelines.

During the past months, the US Secretary of Energy and US Climate Envoy have visited the Mexican president to voice the Biden administration's concerns with the energy reform. Nonetheless, no policy changes have occurred, even as diplomatic pressures keep rising.

 “Unfortunately, while we have tried to be constructive with the Mexican government in addressing these concerns, there has been no change in policy in Mexico, and US companies continue to face arbitrary treatment,” wrote Tai.

Ambassador Tai finished the letter with a clear statement, where she toughens the US position about potential international arbitration if further protection for US investment is needed. “In the spirit of partnership and continued serious desire to strengthen our joint competitiveness, I want to inform you that I will be considering all available options under the USMCA to address these concerns. I, therefore, urge your government to discontinue these concerning actions and ensure the rights of US investors and exporters are protected.”

Tai’s letter was delivered simultaneously to US Climate Envoy John Kerry's visit to Mexico and Canada’s statements on the energy reform. After the encounter with Kerry, president López Obrador mentioned that the US has been the main foreign government lobbying to change proposed energy reform by suggesting that the initiative breaches the North American trade deal. “They have communicated that they do not agree with [the reform] and even insinuated that it violates the [USMCA] deal when that is not true,” he said.

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