Mexican President Andrés Manuel López Obrador said Mexico “cannot take away” ownership of its energy resources.
Heads of Canada, Mexico and the United States are set to meet next week, and a dispute could center around whether Mexico violated trade agreements by increasing state control over its energy markets.
where is the conflict?
Tensions over Mexico’s nationalist policies became a formal dispute in July when the governments of Washington, D.C. and Ottawa filed complaints against Mexico under the United States-Mexico-Canada Agreement (USMCA), a joint trade agreement between the two countries. developed to.
The complaint states that Mexico’s President Andrés Manuel López Obrador’s efforts to turn the market in favor of Mexico’s state-owned oil company Petroleos Méxicans (Pemex) and state-owned electricity company Comision Federal de Electricidad (CFE) It claimed that it discriminated against companies in the United States and Canada.
Businesses also complained that bureaucratic delays hampered operations.
Talks to resolve the dispute have begun and progress has stalled, but Canada and the United States agreed last year to extend the process beyond the original 75-day period.
The USMCA can call a Dispute Panel to rule if a dispute is not resolved during negotiations.
What about Mexico’s defense?
Lopez Obrador took a bullish stance, saying Mexico was not breaking the law and “nothing will happen.”
That was after he overhauled the electricity market in the name of national sovereignty, prioritizing CFEs over private companies in connecting power plants to the grid.
As part of its efforts to root out corruption, it has often spoken out against foreign and private participation in the energy sector, arguing that past governments have distorted markets in favor of private capital.
He also notes that energy is a domestic issue and that he inserted an article in the USMCA that provides for “undivided” ownership of Mexico’s oil and gas. Critics say the article does not justify Lopez Obrador’s policies toward foreign companies.
Can Mexico settle disputes?
Most analysts predict Mexico will lose if the panel is asked to settle the dispute. This could be very expensive for Mexico and increases the likelihood of the US imposing punitive tariffs.
Both countries have previously stressed that they want to resolve their differences before they reach the panel.
Negotiations slowed after Mexico’s economy minister resigned in October. Her successor wiped out several experienced trade negotiators, leaving an inexperienced trade negotiation team behind.
The new team has put forward proposals that can address two of the four areas of discussion, and says it also addresses other US concerns. But there are few clear signs of meaningful progress.
The solution appears to hinge on the willingness of energy nationalists within the Mexican regime, which took its cues from Lopez Obrador, to compromise.
What is the Mexican bargaining tip?
Lopez Obrador has made energy policy the cornerstone of his presidency, making it hard for him to back down.
His administration also tends to be more important in Washington, D.C., where Mexico’s support for tackling illegal immigration stands out in U.S. domestic politics, giving the government an unspoken, even unmentioned It also bears in mind that it is influential.
Mexico’s industry is also so closely integrated with the US economy that a trade dispute could prove painful for both countries at a time when the region seeks to reduce its dependence on Asia and curb skyrocketing inflation.
Still, the dispute has taken a toll on Mexican investor confidence. Lopez Obrador is seeking U.S. help to finance solar production in northern Mexico and attract investment in greener manufacturing, especially in its key industry, car manufacturing.
