Mexico: AMLO Discards Suggestion from US Government to Monitor Electricity Reform

The President of Mexico, Andrés Manuel López Obrador (AMLO) said on Friday, April 1, that “the electricity reform will remain as it is because it already includes what they [the US] are concerned about, which is energy transition. This is why we are going to send them the initiative, so that they can have a good look at it.” He made this comment in response to questions from the press about a meeting that took place on Thursday, March 31, between US officials, US businesspeople, and the president of Mexico.

For the purpose of the bilateral meeting, the Mexican government prepared a decalogue which stressed the Mexican government’s commitment to proceed with the ongoing reform of Mexico’s electrical industry sector “without acting unfairly and arbitrarily,” and also promoting the use of clean energies. However, the government of Mexico has also reminded the US to respect Mexican sovereignty.

During his April 1 morning conference, AMLO commented, “There were really no protests [from US representatives]; they were very respectful.” Regarding the North American Free Trade Agreement, he asserted that “there is nothing that implies that we are not complying. Nothing.”

However, President López Obrador was blunt in his rejection of a suggestion, made by the US, to allow a group of envoys from the White House to “monitor” the progress of the electric reform initiative. The initiative will be voted on this month by the Mexican Chamber of Representatives.

“They made the suggestion and I remained silent,” the president told the press.

“I did not accept it,” he continued. “It is as if I were to go to the United States and propose to President Biden that he should reduce the price of gasoline by decree, [he] would rightly tell me: ‘And why is this your business? Stop being such a busybody.'”

AMLO asserted that it is one thing to establish a dialogue and another “to impose a group of observers to monitor us. Nobody would allow that. Maybe yes, maybe in other times, submissive governments would, but the times have changed now.”

In Friday’s presidential press conference there were many questions concerning the five-hour meeting held at Mexico’s National Palace, between President AMLO and a delegation headed by John Kerry, US special envoy on climate change, who was accompanied by executives of US multinational companies AES, Sempra Energy, Invenergy, New Fortress Energy, Blackstone, General Motors, Johnson Controls, Talos, and Ford.

AMLO said that the delegation “felt well attended and satisfied with the meeting, because it is not true that the reform initiative is promoting the use of environment-polluting energies. It is not true that we have not considered using solar energy, wind energy, and hydroelectric energy.”

López Obrador also informed that his government has made an effort not to increase the number of coal-based electric power plants in Mexico. The three that currently exist work at 50% capacity. Mexico’s coal-based energy levels “are nothing” compared to those of the United States or China.

AMLO informed that in the meeting with the US envoys, the North American Free Trade Agreement (T-MEC) was also discussed, “because some people have been [wrongly] saying that we are not complying with the agreement, regarding this issue [clean energy].” He, however, clarified that Mexico will not participate in anything that could signify corruption, such as the self-supply contracts previously used by private companies in Mexico. “This is also in the treaty,” he commented.

The decalogue
In the decalogue that the government of Mexico prepared for the meeting with US officials, the first point offers the government’s guarantee of respecting the import permits for oil companies such as ExxonMobil, Valero, Koch, Shell, and Tesoro, as long as they abide by the conditions of fair prices and legality, “that is, as long as they do not sell stolen or smuggled fuel [huachicol].”

As a gesture of goodwill, the AMLO administration promised to lift all legal procedures and closures that had been ordered due to the alleged use of smuggled fuel by transnational companies. However, there would be high penalties if any of the companies were to recur to these practices again. The Mexican government revealed that companies have built fuel terminals without permits, so the only option for these is their acquisition by the state-owned oil company PEMEX.

Furthermore, no new permits will be granted in the energy sector, because the objective of the proposed electricity reform is to strengthen PEMEX and the Federal Electricity Commission (CFE), which from now on will have priority “for the good of the people and the nation.”

The third point of the decalogue asks the US oil companies who have oil and gas extraction permits granted by the previous administrations to invest in the country, because out of the 112 concessions granted during the previous administration, only two have done so and the rest have done nothing. This is the case of companies such as Talos, Fieldwood, ExxonMobil, Murphy South, Chevron, Truth, and Roma Energy.

Point four of the decalogue proposes that exploration and drilling operations should begin in the Zama deposit, owned jointly by PEMEX and Talos Energy. If Talos withdraws its lawsuit rejecting PEMEX’s joint participation, PEMEX would begin drilling. Zama has the potential of producing between 550 and 650 million barrels of oil worth almost $5 billion, subtracting taxes.

Point five confirms CFE’s 54% electricity market share, which would give the private sector the remaining 46%. “Why would this be considered as a nationalization if we are sharing the market?” remarked AMLO.

AMLO reiterated that this is not a statist or expropriatory initiative. “What we want is to rescue PEMEX and CFE for national security reasons and to maintain fair prices for consumers and to avoid crises such as those in Texas or Spain,” he explained.

López Obrador stressed the importance of moving towards energy self-sufficiency and recognized Biden’s effort on this matter. “President Biden is being very radical, but he is right,” he commented. “How is it that contracts have been delivered and instead of investing and producing they are used to speculate?”

The sixth point of the decalogue refers to Sempra and other companies that have agreements with CFE regarding transportation contracts in gas pipelines. The government proposes to invest in Topolobampo, Salina Cruz and Coatzacoalcos to build three liquefaction plants and export gas to countries in Asia, America and Europe. The interested parties must reach agreements with CFE within a month, at the latest, otherwise the public company will bid.

Points seven and eight refer to joint energy production initiative of private and public sectors.

Point nine highlights that the current administration of Mexico is committed to fighting pollution and lists recent measures taken to support solutions for climate change. As examples of this, AMLO mentioned the Sembrando Vida (Sowing Life) reforestation program, and a cap on oil production, as well as a willingness to support the energy transition of the US automotive industry’s energy transition in Mexico.

The final point of the decalogue reiterates Mexico’s willingness to negotiate with the US, as well as the importance that the US and its companies hold for Mexico. This must be accompanied with a respect for the sovereignty of both countries, “without illegalities, interference and corruption.”

AMLO suggests PRI representatives should rebel
During the morning conference, López Obrador also suggested that the parliamentarians of opposition party PRI should “rebel against their leadership and support the reform initiative that aims to strengthen the CFE, and thus side with the people and not assume a shameful stance favoring foreign companies.”

“Remember what General Cárdenas used to say: ‘whoever hands over the natural resources of the country to foreigners is a traitor to the country,’” he remarked, referring to President Lázaro Cárdenas, of PRI, who had nationalized the petroleum industry 84 years ago.

López Obrador commented that he has trust that the PRI legislators would vote in absolute freedom, “and not just following orders from above.”

Billions in potential investments are at risk, claims Washington
The electrical energy reform implies possible violations of the free trade agreement between Mexico, the United States and Canada and “puts billions of dollars of potential investment in Mexico at risk,” claimed Joe Biden’s special envoy for climate change, John Kerry. US Ambassador to Mexico, Ken Salazar also commented the same during the meeting with President Andrés Manuel López Obrador.

While the president assured that the long meeting held at the National Palace left US officials “satisfied” and “very happy,” the US embassy revealed that, during the meeting, Biden’s envoys “reiterated the United States’ concerns regarding changes in energy policy” of Mexico.

This is the second time that the US embassy has issued a statement indicating that there have been conflicting positions during talks between the two governments regarding the reform.

In January, after a meeting between López Obrador and the US Secretary of Energy, Jennifer Granholm, AMLO informed that Biden’s envoy did not raise concerns about the reform.

The very next day, the US embassy released a statement claiming that Granholm had emphasized “the real concerns of the Biden administration about the potential negative impact” of the initiative.

On April 1, the US embassy stated that Kerry and Salazar defended the existing projects and contracts that a large number of US renewable energy providers have with the Mexican government, arguing that “they represent a solid base for the development of the future of clean energy in North America.”

Kerry and Salazar pointed out that “full implementation and adherence to our trade agreement is necessary to promote our shared interests and regional competitiveness.”

The US envoys also addressed the basic principles that their government considers should guide policy within the energy sector, which includes accelerating the transition to renewable energy, promoting the economic integration of North America, and compliance with the T-MEC/USMCA free trade agreement.

“President López Obrador agreed that these are important points,” stressed the Biden government representation, and added that this is Kerry’s third trip to Mexico in five months. “This highlights the importance for the US government of this bilateral relationship in the global fight against the climate crisis,” said the envoys.

Kerry claimed that US led renewable energy projects exemplify how renewable energy projects can create thousands of jobs in Mexico, reduce energy costs for the Mexican people, and reduce greenhouse gas emissions to help limit global warming to less than 1.5℃.

Featured image: US Ambassador to Mexico, Ken Salazar (left), US Envoy on Climate, John Kerry (center), President of Mexico, Andrés Manuel López Obrador (right), at a meeting in the National Palace on March 31. Photo: Twitter/@lopezobrador_

(La Jornada) by Fabiola Martínez, Laura Poy, Arturo Sánchez Jiménez

Translation: Orinoco Tribune

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