Lithium Nationalization Violates USMCA
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Lithium Nationalization Violates USMCA

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Karin Dilge By Karin Dilge | Journalist and Industry Analyst - Wed, 02/09/2022 - 17:50

US senators are pressuring the Biden administration to stop Mexico´s president from nationalizing lithium deposits, claiming it violates USMCA clauses.

President López Obrador´s aspirations “to exploit Sonora’s lithium for the benefit of the nation” may not occur because US legislators state that a prohibition to the exploitation of strategic minerals would mean the violation of the USMCA.  

US senators Bob Menéndez, Jeff Merkley, Tim Kaine and Brian Schatz expressed their concerns about “Obrador’s actions to subvert private-sector renewable energy development efforts in Mexico in favor of state-owned fossil fuel industries and urge the Biden administration to more forcefully speak out in support of renewable energy production that will benefit both of our countries.”  

“In December, in line with President López Obrador’s efforts to hinder growth in Mexico’s renewable energy sector, Mexico submitted a woefully underachieving revised nationally determined contribution (NDC) to the Paris Agreement committing only to reduce emissions by 22 percent and black carbon emissions by 51 percent by 2030,” affirmed the senators.

The senators have said that this legislation would prohibit concessions to mine strategic minerals like lithium and copper, considered even more detrimental to the Biden administration´s priorities.

“This policy would contradict the USMCA’s prohibition of new investment restrictions and exacerbate national security concerns related to critical mineral scarcity. It would also threaten US$ 44 billion in private investment in Mexico’s energy sector, will negatively impact U.S. private sector investment in Mexico, and is antithetical to the historical strong U.S.-Mexico economic relationship,” said the senators.

Prior to Jennifer M. Granholm, U.S. Secretary of Energy´s visit to Mexico, the senators urged the Biden administration to more forcefully express concerns about the president's detrimental fossil fuel agenda. In view of the fact that public reports indicate that Obrador interprets the Biden administration’s relative public silence on this issue as indifference or even tacit approval for his government’s decision to prioritize fossil fuel development over renewable energy, they said.

Moreover, they write “cooperation with Mexico on clean energy development, including the cultivation of critical minerals, is essential to advancing competition with China and to ensure cost-efficiency energy generation for the people of Mexico.”

Nevertheless, China´s mining projects in Mexico are widely known, especially since it is considered one of the main producers of lithium-based batteries. Last week, the Federal Economic Competition Commission (COFECE) authorized the acquisition of the Sonora lithium deposit by a Chinese enterprise, Ganfeng Lithium.

However, López Obrador criticized COFECE for having more power than him and to deliver its national natural resources to foreign companies. In addition, the president said that the US reprimanded Mexican authorities for the Ganfeng transaction since China is considered the US´ biggest commercial competitor. In regards to this, López Obrador said he wished not to enter into conflicts and that these permits must be reviewed thoroughly to avoid any misunderstandings.

Photo by:   pixabay

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