There’s a storm in the air: the relations between the United States and Mexico, strategic for both countries, cross a zone of high tension with a project of reform of the energy market of the leftist government Mexican that electrifies Washington.
“February to May are months that will be critical,” an American source in Mexico City told the press.
Presented in October, the project consists in strengthening the national public companies (the oil company Pemex and CFE for electricity) vis-à-vis the private sector. It comes in the form of a constitutional reform, which must be approved by April. Congress resumes session on Tuesday.
The constitutional reform wants to correct the opening of the market launched in 2013, at the time of the “neo-liberal” president Enrique Pena Nieto, and denounced by his successor, Andres Manuel Lopez Obrador.
The text wants to reserve at least 56% of production for the Federal Electricity Commission (CFE, 100% public), against 38% currently and 62% for the private sector.
“Electricity tariffs can be kept below inflation,” the government hopes. Inflation is at its highest for 20 years (7.36% in 2021).
The executive also intends to keep the monopoly on its lithium production. Mexico is one of the producers of this strategic metal for the manufacture of microprocessors, far behind Chile and Australia.
The reform “threatens at least $44 billion in private investment in Mexico’s energy sector,” repeat Democratic heavyweights in Washington.
“If approved, the Mexican government could cancel renewable energy permits, contracts,” reads a letter to Secretary of State Antony Blinken signed by Senate Foreign Affairs Committee Chairman Robert Menendez.
“One of the most discussed points of the reform was its proposal to cancel all the contracts which were signed with the private companies for the production and the supply of electricity”, also advances the Mexican branch of the audit firm international Deloitte.
Debate on renewable energies
“We are not going to expropriate anything, not even the slightest screw,” said Energy Secretary (Minister) Rocio Nahle this week about this reform, which also worries the Spanish Iberdrola.
“There are certain cases which can be considered as indirect expropriations”, analyzed in October Valeria Vazquez of the firm Deloitte, in an interview with the specialized letter NaturalgasIntel. “This is when the state does not take over an asset or property, like a power plant, but diminishes the economic value of a ‘business’.”
The United States, signatories with Mexico and Canada of the North American Free Trade Agreement, can rely on the internal adversaries of the constitutional reform, which must be approved by 2/3 of the members of Congress and the Senate.
Among them, the strong man of the ruling Morena party in the Senate, Ricardo Monreal, who had announced a postponement of the reform until April, and wanted it to be amended.
There are also the governors of the northern states bordering California and Texas, such as Baja California or Sonora. The “Baja” wants to stay connected “to the fourth largest economy in the world, which is California”, suggests the American source in Mexico.
Among other arguments, the United States believes that the reform will favor polluting coal-based energies, to the detriment of “clean” or “renewable” energies.
“It’s a lie,” the energy secretary said. “In Mexico we only have 3% coal-based electricity generation, compared to 22% in the United States and more than 50% in China. Germany has resumed its production of electricity from coal.
“Each country adapts to the resources at its disposal, and on this point we are not going to criticize the others”, slipped the secretary, as if she was aiming at Washington.
The constitutional reform plans to revise three articles of the Mexican Constitution (27 to 29) which state that natural resources are property of the Nation.
“In the Mexican belief system, energy is the central question of popular sovereignty”, analyzes the writer and journalist Ricardo Raphael in the washington post. “The electricity and oil industries are perceived as national assets which the state must have control over”.
“This is not the case in the United States, where the private sector has intensive participation and the government intervenes only as a regulator of the markets,” he adds.
Flagship of national industry, the national public oil company Petroleo Mexico (Pemex) was born from the expropriation in 1938 of 17 Anglo-Saxon companies by President Lazaro Cardenas, a high point in the contemporary history of Mexico.