The Mexican President’s Controversial Electricity Reform, Andres Manuel Lopez Obrador (AMLO), Caused discomfort in The United States and CanadaThese are the countries with which Mexico last year opened a new phase of cooperation through a trade agreement T-MEC.
At the president’s suggestion, the Mexican Congress approved a reform that prioritizes the Comision Federal de Electricidad (CFE) generic generator at the expense of national and foreign clean energy companies.
Although a federal judge suspended the reform indefinitely on Friday due to a torrent of protections from private companies, Lopez Obrador promised to fight the court battle to the end and even reform the constitution if needed.
T-MEC, on average
This has caused concern to governments and energy companies in the United States and Canada, because, in their view, Mexico is heading towards an electricity monopoly that is in violation of the FTA.
“This reform violates two major chapters of T-MEC. The fourteenth, which refers to investment, and the twenty-second, which refers to the management of state-owned enterprises, ”José Ignacio Martínez, coordinator of the Commercial Analysis Laboratory at the National Autonomous University of Mexico, told EFE Sunday (UNAM).
In light of this, the expert warned that the treaty stipulates that governments can convene committees to settle disputes in the event that “discriminatory treatment is discovered, in this case by giving preference to a government company.”
But Lopez Obrador, who has promised to revitalize the public energy companies CFE and Pemex, asserts that his reform does not violate the FTA.
On several occasions, he has indicated that as an elected president, he halted the T-MEC negotiations in 2018, then led by his predecessor Enrique Peña Nieto, until a complete separation of energy was withdrawn from the agreement.
For this reason, it defends the legitimacy of the reform, which requires that CFE’s old and fossil fuel stations be supplied first via private combined and renewable cycle stations.
It also orders a retrospective review of previous government contracts with independent energy producers, as well as changing the rules for Clean Energy Certification (CEL) to award them to legacy CFE plants.
The American Chamber of Commerce in Mexico warned in a statement that the reform “is inconsistent with the obligations that Mexico has undertaken in the framework of T-MEC by not recognizing acquired rights and awarding contracts under the current legal framework.” .
This group of more than 1,400 American companies operating on Mexican soil warned that they “violate freedom of competition” and affect “the energy integration of North America.”
Far from reaching businesses on the matter, Lopez Obrador directly criticized US Wal-Mart and Mexican Bimbo on Friday for paying less for electricity than Mexican families are paying, and assured that his reform would reverse that.
“There is concern for our North American companies that the reform violates the T-MEC and some are considering bringing it to court,” American businessman Larry Robin, president of the American Association in Mexico, explained to Efe.
Robin warned that many companies have a “green agenda” and that energy reform, which discourages clean energy, will drive away their investments.
Between 2015 and 2018, the year Lopez Obrador took office, 15% of foreign direct investment went into the energy sector.
For this reason, the reform includes “a lot of risk of limiting economic growth” which fell by 8.2% last year due to the epidemic, Banco Base’s Analytics Director Gabriella Siller explained to Efe.
Governments are in a state of expectation
At the moment, public friction between the governments of Mexico, the United States and Canada is minimal, although they are awaiting what will happen in Mexican courts with reform.
During a hypothetical meeting last week, Canadian International Trade Minister Mary Ng highlighted the importance of preserving a stable and predictable business environment for Canadian companies that contribute to Mexico’s economic growth to Mexico’s Minister of Economy.
The Mexican Economy Ministry declined to comment on the matter.
While Lopez Obrador and his US counterpart, Joe Biden, are strengthening their cooperation on immigration and health, they have put the energy debate aside for now.
The Mexican confirmed during the hypothetical meeting that both of them held on the first of March that Mexico seeks “sovereignty over energy,” while Biden limited himself to “listening.”