Mining, Energy Reforms to Be Challenged During USMCA Review

With USMCA approaching its first review in 2026, the Mexican Institute for Competitiveness (IMCO) has warned of potential trilateral issues due to the Mexican government’s constitutional reform initiatives set to be introduced to the new legislature in September 2024. 

Among the government’s 18 proposed initiatives, IMCO has identified five that could potentially violate USMCA's provisions:

1. The elimination of autonomous bodies like COFECE and CRE

2. Banning concessions for open-pit mining activities

3. Limiting CFE's ability to contract with private companies

4. Banning genetically modified corn

5. Prioritizing water availability for personal and domestic use

Regarding the ban on open-pit mining, while it has been established that it will not affect existing concessions, IMCO stressed that there could be conflicts arising from Chapter 14. The chapter prohibits preferential treatment toward public companies over private investors from other countries. "The Minimum Standard of Treatment clause in USMCA protects investors against measures that could affect their operations and property," states the institute.

Regarding the energy reforms, IMCO also highlighted a potential conflict with the Ratchet clause, which stipulates that a country cannot roll back pro-trade and investment measures or close sectors that were previously open to private participation.

To date, the USMCA dispute resolution mechanism has been invoked seven times across various sectors, including dairy, automotive, energy, agricultural biotechnology, and solar panel manufacturing.

USMCA is scheduled to remain in force for 16 years, until 2036. During the next review in 2026, the participating countries may decide to extend the treaty for an additional six years, which would allow it to last until 2042. However, if they decide not to extend it, annual reviews will be conducted until it expires in 2036.

The future of USMCA will be influenced by the results of the US elections. While Louise Blais, Former Ambassador, Canada, said that no matter who wins, the treaty will remain in place, as the United States needs Mexico for trade, Donald Trump has previously used trade to pressure Mexican authorities, which means relations may turn hostile.