LatinNews Daily - 10 February 2022

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MEXICO: International relations further strain over energy reform

On 9 February, US Special Presidential Envoy for Climate John Kerry visited Mexico amid rising international tensions surrounding President Andrés Manuel López Obrador’s contentious electricity sector reform.

Analysis:

Tensions between the US and Mexico have been building over the proposed electricity reform, which is currently being debated in Mexico’s congress, and seeks to prioritise the state-run electricity firm Comisión Federal de Electricidad (CFE) over private renewable energy providers. Concerns raised by Kerry add to recent comments from US Energy Secretary Jennifer Granholm, US ambassador to Mexico Ken Salazar and the American Chamber of Commerce (Amcham), which groups US firms operating in Mexico. The reform also indirectly strained relations between Mexico and Spain on 9 February, indicating that the fallout from the reform, which López Obrador is trying to push through congress, could well be wide reaching.

  • Kerry and Salazar met with López Obrador, along with Mexico’s foreign and finance ministers, Marcelo Ebrard and Rogelio Ramirez de la O, respectively, to discuss bilateral efforts to fight climate change. The two governments launched a US-Mexico climate and clean energy working group, which will focus on developing renewable energy, tackling methane emissions, electrifying transport, and eliminating deforestation.
  • López Obrador said that he and Kerry had spoken “with honesty and respect”. Kerry stressed that the US “totally respects Mexican sovereignty” and acknowledged the reform was important to López Obrador.
  • However, despite the conciliatory tone, Kerry and Salazar said they raised the “significant concerns” that the US administration of President Joe Biden has about the energy sector reform. Speaking to Reuters news agency, Kerry said it was important the reform did not “run up against” the US-Mexico-Canada Agreement (USMCA) on regional trade and did not “act as a hindrance to an open and competitive market”.
  • The concerns add to those raised by Granholm after her visit to Mexico on 20 January.
  • Speaking in Mexico’s congress on 8 February, Amcham Director Ana López Mestre said the reform would affect investor confidence, contradict promises made in the USMCA and compromise the transition to clean energy.
  • In a press conference on 9 February, when responding to a journalist’s question about US concerns over the reform, President López Obrador criticised Spanish firms including energy companies, Iberdrola and Repsol, which he claimed previous Mexican energy policies had unfairly favoured. López Obrador said relations with Spanish businesses “were not good” and that he “would like to have a pause in relations until things normalise”.
  • Spain’s foreign minister, José Manuel Albares, expressed surprise at the comments, saying he had received no official communication regarding a break in relations and sought to downplay them, saying they were made in an “informal context”, in response to a journalist’s question.

Looking Ahead: The congressional debate on the reform will conclude on 15 February. It is unlikely that the reform will pass in the lower chamber of congress without significant changes, given that the ruling Movimiento Regeneración Nacional (Morena) party is 56 seats short of the two-thirds majority needed for a passing vote. Opposition parties have repeatedly expressed concerns over the reform, with the Partido Revolucionario Institucional (PRI) representing the president’s most likely potential source of support.

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