By RICARDO CASTILLO
At long last, we are beginning to hear some of the details of the United States Mexico-Canada Agreement (USMCA) negotiations. According to Mexican President-elect Andrés Manuel López Obrador (AMLO), the toughest clause was on energy, which was almost a deal-breaker.
After heavy disputes, that bickering President Donald Trump finally softened his stance and spoke over the phone to AMLO. Both came to the conclusion that things would be better left as they were under the old North American Free Trade Agreement NAFTA).
While touring the nation in San Luis Potosí over the weekend, AMLO told a large attendance at a rally that the U.S. proposal “practically left Mexico without freedom or sovereignty” in terms of the management of oil, gas and electricity.
In a rare criticism of President Enrique Peña Nieto’s negotiating team, AMLO said the current administration had allowed negotiations to give the United States virtual control over Mexico’s energy resources. AMLO, a lawyer, said if he had accepted the negotiated terms on energy, the United States “would have had us grabbed by the neck.” (“Apergollados,” he said, using a very rare old-fashioned Spanish word that means “by the neck.”)
In the phone interview, Trump “gave the green light” to the proposal AMLO made for retaining Mexico’s sovereignty over energy resources.
“They wanted us to approve a chapter over energy about this thick,” AMLO told the crowd in San Luis Potosí, signaling with his fingers the five-inch thickness of the text. “That practically left us without freedom and sovereignty, and we said, ‘noooo ,we won’t accept that’!”
The question is: What forced a usually-reckless Trump to accept the Mexican position? On Oct. 3, the Washington Post ran an article by reporter Dino Grandoni, headlined “Big Oil and Gas Companies Are Winners in Trump’s New Deal.”
What forced Trump to accept AMLO’s demand was the pressure from Mexico’s diverse gas and oil industry chambers, which, despite cheering Trump on, said they feared that breaking up negotiations over the USMCA would literally translate on heavy losses for their sector.
“The oil business convinced the White House to keep a number of features of the old NAFTA deal in the new agreement, including provisions that help protect U.S. oil companies’ investments abroad and allowed for tax-free transport of raw and refined products across borders,” the article said.
Then it adds a quote from a recognized field expert: “’We’re mostly happy that it’s been preserved, that many of the provisions in the original NAFTA that had supported the integrated North American energy markets are still in place,’ said Aaron Padilla, a senior adviser for international policy at the American Petroleum Institute, the nation’s biggest oil and gas lobbying group.”
Nevertheless, to many international oil companies, the upcoming AMLO administration still has a lot of things to explain about how President Peña Nieto’s much-touted Energy Reform is going to end up after 2024, when AMLO is slated to finish his mandate.
Although AMLO has pledged to respect all contracts signed by international oil concerns for oil drilling and prospecting, the president-elect has said he will scrutinize all contracts to prevent unwarranted losses to crooked deals he claims the Peña Nieto administration carried out.
For one, in San Luis Potosí, while meeting with state Gov. Manuel Carreras, AMLO said that all potential contracts for fracking will be banned “not just in San Luis Potosí, but the nationwide.. That clears up at least one doubt. Any hopes for U.S. fracking entrepreneurs to invest in Mexico have now been nixed.
What will be respected from the Energy Reform are the concessions to establish filling stations with their own brands. In fact, companies such as Shell, Spain’s Repsol, British Petroleum, Mexico’s Oxxo Gas and convenience stores, Hidrosina, Petro-7, Chevron and Gulf can feel confident that their investment in as many as 3,000 new filling stations (and counting) can “compete” in the Mexican market.
Notice the word “compete,” because all fuel at stations comes from the same source, Pemex, even though much of it is now imported from the United States duty-free.
In his last State of the Nation Address, Peña Nieto acknowledged that Mexican gasoline production during his administration dropped by 50 percent, while imports rose to 63 percent.
According to that address, also – and this is something AMLO firmly disapproves of – national fuels production dropped from 437,000 barrels per day in 2013 to just 217,000 today. Imports, however, rose from 347,000 up to 567,000 as of last June.
AMLO feels this must change. He insists that the current administration hid proven oil fields from going into production and purposely forced Pemex to diminish both production and refining, leading to gas shortages and imports.
AMLO, for starters, has made the commitment to build a new refinery in Dos Bocas in his native state of Tabasco and upgrade investment in Pemex eight still working refineries to revamp them and hopefully cut down on imports.
The July 1 massive vote in favor of AMLO signified the total rejection of the policies of Peña Nieto, who “ruined” the industry that is still nationally owned. The proof is in the pudding: In December 2012, when Peña Nieto took office, Mexico’s crude production was 2.5 million barrels per day; it has since decreased to 1.8 million barrels a day and still dropping. Mexico’s July 1 vote was a demand for AMLO to change this situation and he ran on a platform that promised to do just that.
This would not have been possible had AMLO agreed with what was in the USMCA (or, you can use the new Spanish abbreviation adopted by the Mexican negotiators, AMCUS). However, with the approval of Donald Trump, AMLO can now carry out his platform promises, only respecting what was signed under NAFTA before and kept in Trump’s idea of a new negotiation. That is, after all, what the U.S. oil industry wanted, with the exception of the fracking clause.
This is but one of the dirty little secrets that tormented the year-long UMSCA.