The United States has deep and enduring interests in a stable and prosperous Mexico. The two countries are among the major trading partners of the other; their climates, cultures and supply chains are deeply interconnected; and US national security concerns regarding migration from the Northern Triangle region of Central America are heavily influenced by employment, prosperity, and economic opportunities within Mexico itself. Unfortunately, the federal government of Mexico, under the auspices of the administration of Andrés Manuel López Obrador (AMLO), is now taking action in the area of energy and climate which, contrary to Mexican law and trade agreements international organizations, which cause vast economic damage and put unnecessary strain on the cross-border relationship. These measures, such as the constitutional changes underway in the power generation sector, are severely eroding the investment climate in Mexico in all sectors, quickly reversing efforts to reduce greenhouse gas emissions in the country. Mexico in line with its own national climate goals and threatening to undermine shared bilateral interests in improving economic conditions and quality of life, especially in the southern regions of Mexico. Resetting bilateral climate and energy cooperation is possible with respect for Mexico’s energy sovereignty, but it must begin with President Biden’s decisive action to protect US interests and the commitments of the United States Agreement. United-Mexico-Canada (USMCA).
In an effort to protect the finances and monopoly positions of the national oil company, Pemex, and the Federal Electricity Commission (CFE), the Mexican government seized terminals owned by the United States and used to import American petroleum products for Mexicans, giving preference to GHG-emitting sources of electricity over private renewable sources, and political control from the former independent regulator Comisión Reguladora de Energía (CRE) to the National Energy Ministry, the Secretaría de Energía (SENER), thus allowing CRE to be used to block permits to develop renewable energies and to harass American companies. These measures violate the commitments that President López Obrador himself made when he (re) signed the USMCA. Among other stipulations, this agreement grants U.S. companies national treatment in Mexico that prohibits discrimination in favor of state-owned Pemex and CFE corporations, prohibits energy barriers from U.S. energy products, and prohibits any government effort to nationalize and of expropriation of private companies the assets. Mutual respect and assurance of these carefully negotiated arrangements are central to the bilateral, if not trilateral, relationship, and to the strength of North America as a whole in a highly competitive global economy.
So far, the Biden administration, aware of Mexico’s much-needed cooperation on immigration issues, has remained largely silent on the actions of the AMLO government that so clearly threaten cross-border cooperation on energy and climate security. President López Obrador is a leader who believes important messages come from the head of government and, as evidenced by his responsiveness to former President Trump, has shown a willingness to take those messages seriously. When North American leaders meet in Washington this Thursday, it is essential that President Biden, along with Secretaries Blinken and Kerry, be absolutely clear to their Mexican counterparts that these violations of the USMCA treaty, as well as the reforms. proposals that would constitutionally discriminate against non-government producers, are totally unacceptable and will result in retaliation at the highest levels of the US government. It is important to note that President Biden does not need to emulate the style of public warning in asserting American interests associated with his predecessor, and he does not need to overturn the deeply held nationalist energy ideology of ‘AMLO, but it must be clear that there is no laissez-passer for expropriation and discrimination between neighbors and allies. Establishing these red lines is essential to the future prosperity of Mexico and the national security of the United States. On the other hand, inaction will hold back private investment in Mexico – other than that of China – for the foreseeable future. In the meantime, Mexico will continue to back down on decarbonization, reverse its climate commitments – by breaking its own laws – and crush low-cost renewables in Mexico in its misguided nationalist push. In the long run, undermining private investment will jeopardize Mexican prosperity and quality of life not only for Mexicans, but also for residents of the North Triangle region of Central America, in which weakening investment efforts regions will exacerbate illegal migration.
Mexico’s energy reforms, which took 76 years to implement, are now poised to generate both new income for the Mexican economy and low-cost, affordable, privately-funded renewable energy. which will be fundamental for the development of Mexico and the prosperity of its people. The stakes at this week’s meeting could hardly be higher. From President López Obrador’s perspective, when it comes to Washington, silence is assent. President Biden should not miss the opportunity to clarify the American position.
David Goldwyn served as Special Envoy for International Energy under President Obama and Assistant Secretary of Energy for International Relations under President Clinton. He is Chairman of the Atlantic Council Energy Advisory Group.
Neil Brown previously served on the senior Republican staff of the Senate Foreign Relations Committee and is currently a non-resident senior researcher at the Atlantic Council Global Energy Center and CEO of the KKR Global Institute.