It was clear going into 2022 that Mexico and its President, Andrés Manuel López Obrador, would face more distorted and inefficient energy markets. Since taking office in 2018, López Obrador has focused on regaining state control in the energy sector, which he sees as a symbol of Mexico’s sovereignty. However, a series of recent votes have blocked changes that would have further distorted the electricity industry.
Electricity Reform Amendment
On April 10, the Mexican Congress voted down a constitution amendment championed by López Obrador, which sought to eliminate independent regulators and halt public bids for electricity purchases. The current electricity law, introduced in 2013, brought market competition to the sector, allowing the country’s electricity commission to purchase power at a relatively low cost and from a range of sources. However, after the 2021 midterm elections, López Obrador no longer had the votes in the lower chamber for such an amendment to pass, dealing a huge defeat to his agenda and his party.
U.S. officials have been outspoken in their opposition to the proposal, which could have put $10 billion in American investments at risk. President Biden’s Special Envoy for Climate, John Kerry, has visited with López Obrador and energy leaders three times in less than six months after the proposal indicated a shift away from once-shared climate change priorities. Before the vote, United States Trade Representative Katherine Tai noted USTR’s serious concerns with the deteriorating trajectory of Mexico’s energy policies, including the 2021 changes to Mexico’s Electric Power Industry Law.
2021 Electricity Law
Despite this significant blow to his energy plan, an electricity law passed last year remains in force after Mexico’s Supreme Court fell short of overturning it earlier this month. However, because most ministers voted against it but not enough voted to suspend it, overall the energy legislation will stand and private companies will be able to present legal challenges against the law. After the court’s ruling, U.S. Ambassador to Mexico Ken Salazar released a statement warning that it would result in “endless litigation.”
The Council’s SVP Government Affairs, Tim Tarpley, currently sits on the U.S. Departments of Commerce and Energy’s U.S.-Mexico Energy Business Council, which is tasked with providing actionable, non-binding recommendations to both governments on ways to strengthen the U.S.-Mexico relationship in the energy sector.
If you are interested in engaging further on these issues, contact Maria Suarez to learn more about the International Trade Policy Committee and the Latin America Chapter.
Maria Suarez, Director Government Affairs, writes about industry-specific policies for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.