Is Mexico’s AMLO government just blinking in the deadlock with the global energy lobby?
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Washington finally expressed its feelings about Mexico’s dream of energy independence.
Since the Mexican government has threatened to drastically reduce the privatization and liberalization of its energy market in the past three years, it is only a matter of time before its large neighbors in the north express their views on the matter. That moment came last Wednesday (November 3), when 40 Republican lawmakers urged the Biden administration to put pressure on Mexico for what they called discriminatory actions that could harm US energy companies. In a letter to the U.S. Department of State, the Department of Energy and Commerce, and the U.S. Trade Representative, they argued that Mexico’s plan violated the terms of the U.S.-Mexico-Canada trade agreement and called for a “timely and clear response” to the threat.
“His government and his party have always supported regulatory and legislative work, and Mexican courts have ruled that these work have anti-competitive and environmentally harmful effects,” the lawmaker The letter reads“As a result, they are also harmful to U.S. investment, U.S. workers, and North America’s commitment to sustainable development-all of these are concepts protected by the USMCA.”
The response was timely and clear. On the same day that this letter was issued, Ken Salazar, the U.S. Ambassador to Mexico, met with representatives of the Mexican government at the National Palace in Mexico.Salazar Tweet The following message:
I held an important meeting with the Mexican government to discuss the reform of the electric power sector. I want to learn more about the dynamics of the proposed constitutional reform. I also express serious concern about the United States. We are committed to continuing dialogue on these key issues.
The next day (Thursday, November 4), Mexico’s ruling party Morena and its allies in the lower house of Congress agreed to postpone the vote on electricity reform until April due to lack of legislators’ support. Morena’s congressional leader Ignacio Mier Velazco (Ignacio Mier Velazco), Refuse The delay in voting on this project was due to pressure from U.S. Republican lawmakers or Ambassador Salazar’s visit to the Forbidden City last Wednesday. He also insisted that the proposed reforms will not lead to expropriation and that its provisions do not violate the terms of the U.S.-Mexico-Canada trade agreement.
This reform, submitted to Congress on October 1, is one of the cornerstone policies of President Andrés Manuel López Obrador’s six-year term. But now it must wait.
López Obrador (AMLO for short) insists that reforms are necessary to ensure Mexico’s energy independence and future low natural gas and electricity prices. But for the bill to pass, it requires a two-thirds majority to pass, because it needs to amend the constitution. Morena has a relative majority of only 40% in Congress and needs not only the support of its allies, but also the support of the former ruling Revolutionary Institutional Party (PRI), which has not yet come.
The energy reform plan aims to overturn the privatization and market liberalization policies of previous governments. If passed, it will amend Articles 25, 27, and 28 of the Constitution as a means to consolidate the role of the Common Federal Energy Commission (CFE). Therefore, CFE will become an autonomous legal entity, no longer bound by the subsidiaries and committees created in recent decades. CFE will also control production At least It accounts for 54% of the national energy supply.
The proposed reform also stipulates that lithium and other minerals considered to be of strategic significance to the country’s energy transition should be controlled by the state, and the state has exclusive exploration and mining rights. When including this requirement, Write Kurt Hackbart Jacobin, AMLO “takes the ongoing scuffle between the public and private energy sectors to the level of a historic battle.”
But his opponents include some of the world’s largest energy companies. Many of them are located in the United States, Mexico’s largest trading partner. And this trade partnership is far from one of equality. What is shocking is that 82% of Mexico’s exports go to the United States, which is similar to the Cuban economy’s dependence on Soviet trade at the height of the Cold War.Mainly thanks to the North American Free Trade Agreement, Mexico also relies on the United States to import staple foods such as corn and beans and gasoline, even though AMLO is Determined to change this.
Not only companies in the energy industry may be affected by the AMLO energy reform, but large domestic companies and foreign multinational companies with large operations in Mexico will also benefit from heavily subsidized renewable electricity.They include Processing plant (Assembly plant), Coca-Cola FEMSA and other bottlers, and FEMSA’s convenience store chain Oxxo and other large retail companies. According to government data, unsubsidized households or small businesses pay 5.2 pesos per kilowatt-hour on average, while OXXO pays 1.8 pesos and Walmart pays 1.7 pesos. This means that large companies have a huge cost advantage over small business competitors.
“How can a working-class family or a small grocery store owner pay four times the amount Oxxo paid?” asked AMLO in March. “How did they do it? They won special contracts because the law was rewritten, or because they are said to produce clean energy. But the end result is that they have subsidies. Who pays the subsidies? People.”
According to CFE, taking into account subsidies, inflation, exchange rate fluctuations, irregular supply and rising interest rates, opening the energy market to private suppliers has cost the country approximately 412 billion pesos ($20 billion). Among them, 56 billion pesos were used for only one project, namely the La Venta wind farm in Oaxaca, operated by the Spanish energy group Iberdrola. report Hackbart:
La Venta is one of more than 30 wind power projects in the Tehuantepec Isthmus, of which only a few are owned by foreign multinational companies. These projects are notorious for predatory contracts, unpaid taxes, failure to negotiate with local residents, and low profits . 1% of the sharing agreement minus the cost, which is a quarter of the foreign payment. The subsidized energy did not benefit the impoverished Huave, Mixe, Zapotec, and Chontal indigenous groups living around the park, but was used to meet the needs of corporate customers such as FEMSA, Mitsubishi, Gamesa, and Bimbo Group, and these companies can then brag about their benefits. Glossy brochures and commitments to renewable energy at the general meeting of shareholders.
If the reforms proposed by AMLO are passed, companies such as FEMSA, Bimbo, Lenovo, Wal-Mart and Gamesa will have to pay more for electricity.Constitutional amendments will Finish The so-called “self-sufficiency” permits allow these companies to obtain huge subsidies to cooperate in clean energy projects, when in fact they are just customers. In this case, these companies can use one of the numerous trade agreements signed between Mexico and other jurisdictions to initiate investor-state disputes against Mexico to collect future profits, including the US-MCA, Trans-Pacific Partnership The Comprehensive Progress Agreement (CPTPP) or the recently concluded trade agreement with the European Union.
But for now, the reform is in a state of uncertainty. In order for it to cross the line, Morena knew it had to enter into some serious horse deals with other parties. But this also calls for pressure from the grassroots. “Most Mexicans” support the initiative, the party Said last week,This is The recent polls confirm this“But it is crucial to turn this support into a large-scale mobilization. This reform must be approved by the votes of Morena and his congressional allies and street people.”