AMLO’s Energy Policy: An Impending Risk in Mexico-US Relations with Biden’s Arrival 

Energy Challenges Ahead

With the U.S. back in the international treaty, it is expected that President Biden will exert pressure on nations worldwide to meet Sustainable Development Goals. For Mexico, this could result in a short-term standoff. The energy policy of President Andrés Manuel López Obrador’s government has been focused on strengthening state-owned enterprises, such as Pemex and CFE, effectively blocking private domestic and foreign investments in the sector. This includes restrictions on renewable energy sources in favor of highly polluting fossil fuels.

Furthermore, Mexico is not fully complying with its commitments under the United States-Mexico-Canada Agreement (USMCA), also known as T-MEC in Spanish, which includes provisions related to energy. This lack of legal and competitive certainty for businesses that have invested or intend to invest in Mexican territory is a significant concern.

Potential Confrontations

As the United States returns to the Paris Agreement and begins to prioritize cleaner energy sources, it is likely that Mexico will feel the pressure from its primary trade partner. High-ranking U.S. government officials have already expressed concerns, and with Biden’s presidency, these pressures may intensify.

Recently, former U.S. Secretaries of State, Energy, and Commerce, Mike Pompeo, Dan Broulliette, and Wilbur Ross, wrote a letter to Mexican officials, criticizing Mexico’s energy policies for obstructing private energy projects and damaging the investment climate. They also pointed out that Mexico’s regulatory changes have violated the USMCA.

Current Situation

Mexico’s potential refusal to change its energy policies could lead to more assertive actions from the United States to enforce the agreements. In the investment chapter of the USMCA, there are references to cases of non-compliance or violations of the treaty, which could result in investors filing complaints against the Mexican government.

It is expected that Mexico will reconsider its energy policy to maintain favorable relations with the United States and attract foreign investments. However, if Mexico persists in restricting private investment to bolster CFE and Pemex, it may face reductions in domestic project investments. Consequently, investments initially intended for Mexico may be redirected to countries in Latin America that are more receptive to clean energy initiatives.