US to seek talks with Mexico on sources of energy policy

Excess natural gas is flared or flared from Mexican state-owned Pemex’s Tula oil refinery, located next to the Tula power station owned by the national utility Comision Federal de Electricidad , or CFE, in Tula de Allende, north of Mexico City, Mexico June 22, 2020. REUTERS/Henry Romero/File Photo

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MEXICO CITY, July 19 (Reuters) – The United States will seek dispute settlement consultations with Mexico under a regional trade deal over what it sees as discriminatory Mexican energy policies, according to two Mexican sources and a draft announcement seen by Reuters on Tuesday.

The consultations focus on Mexico’s actions that the U.S. Trade Representative says undermine U.S. businesses in Mexico and U.S.-generated energy in favor of Mexico’s state-owned utility Comision Federal de Electricidad (CFE ) and oil company Petroleos Mexicanos (Pemex).

The USTR did not immediately respond to a request for comment on the announcement, which was shared by the Mexican sources and was to be released Wednesday.

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Mexican President Andres Manuel Lopez Obrador, a left-wing energy nationalist, has pledged to revive Pemex and CFE, which he said his predecessors deliberately ‘destroyed’ to leave the market in foreign hands .

The United States now argues that its efforts to bolster state-owned enterprises appear to contravene Mexico’s commitments under the United States-Mexico-Canada Agreement (USMCA) trade pact.

“We have repeatedly expressed serious concerns about a series of changes in Mexico’s energy policies and their consistency with Mexico’s commitments under the USMCA,” U.S. Trade Representative Katherine Tai said in a statement. the draft declaration.

The U.S. decision is a blow to Mexico and comes just a week after Lopez Obrador met his U.S. counterpart Joe Biden in Washington and announced that U.S. companies planned to pump billions into Mexico’s energy sector.

Tai argued that the policy changes being undertaken by Mexico affect U.S. economic interests in multiple sectors and “discourage investment” from clean energy providers and companies looking to buy clean, reliable energy.

In April, Mexico’s Supreme Court upheld controversial electricity legislation passed in 2021 that says CFE must have priority over private electricity providers when shipping or when plants come online. Read more

Lopez Obrador says his measures will benefit consumers and make Mexico more self-sufficient. The opposition says it will raise electricity costs, undermine investor confidence and violate Mexico’s clean energy commitments. Read more

The USTR said it is challenging amendments to Mexican law that prioritize the distribution of electricity produced by CFEs over cleaner energy sources provided by private sector suppliers, such as l wind and solar.

“We have tried to work constructively with the Mexican government to address these concerns, but, unfortunately, American businesses continue to experience unfair treatment in Mexico,” Tai said in the draft announcement.

Mexico’s actions also include “delays, denials and revocations” of U.S. companies’ abilities to operate in Mexico’s energy sector, including renewable energy projects, the USTR said, echoing complaints from business lobbies at the Mexico.

Under USMCA rules, the United States and Mexico would begin consultations within 30 days of the United States’ request, unless the parties decide otherwise, the draft announcement said.

If it does not resolve the matter through consultations within 75 days of the United States’ request, the United States may request the establishment of a dispute settlement panel.

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Reporting by Dave Graham and Anthony Esposito; additional reporting by Steve Holland in Washington DC; edited by Richard Pullin

Our standards: The Thomson Reuters Trust Principles.

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