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Released July 28, 2022 | SUGAR LAND
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Written by Amir Richani for Industrial Info Resources (Sugar Land, Texas)--U.S. Trade Representative Katherine Tai and her Canadian counterpart Mary Ng recently expressed opposition to Mexican policies that they believe undermine trade within North America. Tai, in a statement, requested dispute settlement consultations under the United States-Mexico-Canada Agreement (USMCA), a trade agreement among the three countries signed in 2018.
"We have repeatedly expressed serious concerns about a series of changes in Mexico's energy policies and their consistency with Mexico's commitments under the USMCA," Tai said.
Meanwhile, Tai's counterpart, Canadian Trade Minister Mary Ng, echoed her concerns about Mexico's energy policies: "Canada has consistently raised its concerns regarding Mexico's change in energy policy. We agree with the United States that these policies are inconsistent with Mexico's CUSMA (USMCA) obligations."
Ng added that Canada would also take action against Mexico over trade matters: "Canada is taking action by launching our own consultations under CUSMA to address these concerns, while supporting the U.S. in their challenge."
These disputes have emerged following Mexican President Andres Manuel Lopez Obrador's nationalistic policies, which have aimed to strengthen national state companies while sidelining private companies and investments.
Among the most disputed policies are efforts by the Mexican government to amend the electricity law, prioritizing power distribution from the state-controlled Comision Federal de Electricidad (CFE) (Mexico City, Mexico) over private companies.
As part of this project, Mexico would prioritize power generation from CFE plants, and privately owned renewable and fossil-fuel plants. Nevertheless, one of the government's objectives is to increase the CFE's market share from 35% to 54% of Mexico's demand.
Last year, López Obrador submitted to Mexico's congress these and other amendments to the electricity law. Despite being approved, its application was stopped by Mexico's Supreme Court, following the start of legal processes against the government's changes by private companies.
Although the Supreme Court has not ruled last year's amendments as unconstitutional, the electricity changes introduced by López Obrador in 2021 cannot be implemented until the disputes involving private companies are resolved by Mexico's lower courts.
As a way to move forward with the new electricity reform, López Obrador introduced a constitutional reform to the electricity law in April of this year. Nevertheless, the government failed to secure a two-thirds majority to approve the changes, representing a political defeat to López Obrador's efforts to strengthen national companies and restrict private investments in the energy sector. This, however, does not mean the end of the electricity reform, given developments within the Mexican judiciary.
In the oil and gas sector, López Obrador previously had criticized the operations of private companies, citing delays in oil and gas production and investments following the liberalization of the sector in 2013. On the other hand, the government has continuously promoted the operations of Petroleos Mexicanos (PEMEX), while pushing for energy independence by promising the reduction or stoppage of fuel imports.
These are not the first disputes over Mexico's energy policies. In recent years, the U.S., Canada and many energy companies have complained about Mexico's efforts to undo the energy liberalization policies of previous administrations.
So far, Lopez Obrador has brushed off the disputes by highlighting Mexican sovereignty and the protection of local companies.
Lithium Policy
Lopez Obrador's nationalistic plans also have influenced the mining sector. In April, the Mexican parliament approved a bill declaring lithium extraction as national patrimony and leaving its exploration and production to state companies. As part of this reform, no new licenses to private companies may be granted, and current contracts could be revisited by the government.
Lithium is a commodity that has gained considerable international demand in the use of batteries for electric vehicles, pushing global markets to increase its supply as the world transitions to more sustainable transportation technologies.
Mexico currently has no lithium production, but has several lithium exploratory projects. The largest is the Sonora Lithium project, owned by China's Gangfeng Lithium, which is a top producer in China and has been buying up lithium projects around the world. Site preparation began on the project in late 2021, but construction has been delayed. Nevertheless, the latest nationalistic measures by the Mexican government may further delay extraction.
Subscribers to Industrial Info's Global Market Intelligence (GMI) Project Database can read more in a detailed project report.
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
"We have repeatedly expressed serious concerns about a series of changes in Mexico's energy policies and their consistency with Mexico's commitments under the USMCA," Tai said.
Meanwhile, Tai's counterpart, Canadian Trade Minister Mary Ng, echoed her concerns about Mexico's energy policies: "Canada has consistently raised its concerns regarding Mexico's change in energy policy. We agree with the United States that these policies are inconsistent with Mexico's CUSMA (USMCA) obligations."
Ng added that Canada would also take action against Mexico over trade matters: "Canada is taking action by launching our own consultations under CUSMA to address these concerns, while supporting the U.S. in their challenge."
These disputes have emerged following Mexican President Andres Manuel Lopez Obrador's nationalistic policies, which have aimed to strengthen national state companies while sidelining private companies and investments.
Among the most disputed policies are efforts by the Mexican government to amend the electricity law, prioritizing power distribution from the state-controlled Comision Federal de Electricidad (CFE) (Mexico City, Mexico) over private companies.
As part of this project, Mexico would prioritize power generation from CFE plants, and privately owned renewable and fossil-fuel plants. Nevertheless, one of the government's objectives is to increase the CFE's market share from 35% to 54% of Mexico's demand.
Last year, López Obrador submitted to Mexico's congress these and other amendments to the electricity law. Despite being approved, its application was stopped by Mexico's Supreme Court, following the start of legal processes against the government's changes by private companies.
Although the Supreme Court has not ruled last year's amendments as unconstitutional, the electricity changes introduced by López Obrador in 2021 cannot be implemented until the disputes involving private companies are resolved by Mexico's lower courts.
As a way to move forward with the new electricity reform, López Obrador introduced a constitutional reform to the electricity law in April of this year. Nevertheless, the government failed to secure a two-thirds majority to approve the changes, representing a political defeat to López Obrador's efforts to strengthen national companies and restrict private investments in the energy sector. This, however, does not mean the end of the electricity reform, given developments within the Mexican judiciary.
In the oil and gas sector, López Obrador previously had criticized the operations of private companies, citing delays in oil and gas production and investments following the liberalization of the sector in 2013. On the other hand, the government has continuously promoted the operations of Petroleos Mexicanos (PEMEX), while pushing for energy independence by promising the reduction or stoppage of fuel imports.
These are not the first disputes over Mexico's energy policies. In recent years, the U.S., Canada and many energy companies have complained about Mexico's efforts to undo the energy liberalization policies of previous administrations.
So far, Lopez Obrador has brushed off the disputes by highlighting Mexican sovereignty and the protection of local companies.
Lithium Policy
Lopez Obrador's nationalistic plans also have influenced the mining sector. In April, the Mexican parliament approved a bill declaring lithium extraction as national patrimony and leaving its exploration and production to state companies. As part of this reform, no new licenses to private companies may be granted, and current contracts could be revisited by the government.
Lithium is a commodity that has gained considerable international demand in the use of batteries for electric vehicles, pushing global markets to increase its supply as the world transitions to more sustainable transportation technologies.
Mexico currently has no lithium production, but has several lithium exploratory projects. The largest is the Sonora Lithium project, owned by China's Gangfeng Lithium, which is a top producer in China and has been buying up lithium projects around the world. Site preparation began on the project in late 2021, but construction has been delayed. Nevertheless, the latest nationalistic measures by the Mexican government may further delay extraction.
Subscribers to Industrial Info's Global Market Intelligence (GMI) Project Database can read more in a detailed project report.
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
