AMLO’s Energy Reforms Threaten $4.8 Billion in Investment

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Over the course of the last six years, U.S. and Canadian companies have invested more than $4.805 billion in Mexico’s energy sector, capital that is now being threatened by the changes to the electricity and hydrocarbon sectors laws promoted by President Andrés Manuel López Obrador (AMLO).

Among the major companies that have invested in Mexico’s energy sector are Murphy Oil, Chevron, Fieldwood Energy, ExxonMobil, Talos Energy, First Solar, TC Energy, ATCO, Canadian Solar, Cubico Sustainable Investments and Northland Power.

But as a result of AMLO’s proposed changes to current energy laws, each and every one of these companies have indicated that they plan to either withdraw their investments or cut back on future projects.

Since the application of the 2014 energy reform that opened the sector to private investment previously dominated by the state-owned oil company Petróleos Mexicanos (Pemex) and the Federal Electricity Commission (CFE), U.S. firms injected more than $2.8 billion into Mexican energy projects, while Canadian companies invested $2.4 billion, according to Mexico’s Finance Secretariat.

Together, the United States and Canada represent 25.5 percent of the total foreign direct investment in Mexico’s energy sector over the course of the last six years.

That investment has been focused in a number of key activities, such as oil and gas extraction, geological services for exploration of deposits, generation, electricity transmission and distribution, as well as the installation of vital gas pipelines.

Jeffrey Martin, president and CEO of Sempra Energy, pointed out at a recent trilateral conference that the new United States-Mexico-Canada Treaty (USMCA) defends the capital holdings of both nations within Mexico, so the AMLO administration cannot legally favor Pemex and the CFE over U.S. and Canadian companies, as it is trying to do.

“According to the agreement, there is a requirement that governments will not have privileges over state-owned entities,” he said flatly.

“We also have arguments that you cannot approve everything and then apply it retroactively to the market without a bilateral agreement.”

If the matter is not resolved, Martin said, Mexico could lose much of the foreign investment it has gained over the last six years.


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