Mexico defends state-led energy policy as investors look to Biden (updated)
21/01/2021 15:35
(Updates with comment from trade expert, context)
By Dave Graham
MEXICO CITY, Jan 21 (Reuters) - Mexico's president on
Thursday forcefully defended his drive to strengthen the state's
role in the energy sector, seeking to temper investor hopes that
he might give ground if the new U.S. government under President
Joe Biden takes up their cause.
President Andres Manuel Lopez Obrador has worked to bolster
state oil firm Petroleos Mexicanos (Pemex) and power utility the
Comision Federal de Electricidad (CFE), arguing the previous
government skewed the market in favor of private companies.
His interventions have upset some of Mexico's main allies,
including the United States, Canada and major European
countries, and angered investors who believe the government is
violating their rights under trade agreements Mexico signed.
Industry groups and foreign powers expect the Biden
administration to take a firmer line in defending companies'
interests under the United States-Mexico-Canada Agreement
(USMCA) trade deal that took effect in July.
Former U.S. President Donald Trump did little to press Lopez
Obrador over his energy policy, causing frustration among U.S.
lawmakers. Instead, he prioritized making Mexico contain illegal
immigration and even warned some companies not to invest abroad.
At a regular news conference, Lopez Obrador said he saw no
urgent need for talks with Biden because the two had spoken last
month, but noted energy matters would come up at "some point".
He underlined that he would not change energy policy, and
noted Biden on Wednesday immediately revoked the permit needed
to build the Keystone XL oil pipeline. urn:newsml:reuters.com:*:nL1N2JV1AS
"There's not going to be a change because we're not going to
continue with the policy of dismantling the nation's companies,"
Lopez Obrador said. "And they shouldn't be surprised. They,
like any country, defend their strategic economic areas."
Backed by a constitutional reform enacted under the previous
government, renewable energy providers have taken Mexico to
court over measures to sideline their investments to the benefit
of Pemex and CFE, with some success.
But projects have still been held up.
The president noted that Chapter 8 of USMCA underlines
Mexico's ownership of oil and gas, with Canada and the United
States recognizing that Mexico "reserves its sovereign right to
reform its constitution and its domestic legislation."
However, Chapter 8 also states that Mexico's two partners in
USMCA offer that recognition "without prejudice to their rights
and remedies" under the trade agreement.
That meant Mexico was still bound to respect private sector
energy investments under USMCA, said Kenneth Smith, Mexico's
lead technical negotiator during the trade talks from 2017-2018.
Nor, Smith added, had Mexico secured any specific opt-outs
of such commitments under USMCA, which was mostly negotiated
under the previous government, but was signed off after Lopez
Obrador asked for Chapter 8 during his 2018 transition to power.
If Mexico did not grasp the risk of such breaches, it could
face heavy penalties, such as costly arbitration settlements or
restrictions on trade to its top trade partner, Smith said. The
United States alone absorbs some 80% of Mexico's exports.
(Reporting by Dave Graham; Editing by Frank Jack Daniel and
David Gregorio)
((Cassandra.Garrison@thomsonreuters.com; +54 11 5830 7443;))