By THÉRÈSE MARGOLIS
Mexican President Andrés Manuel López Obrador (AMLO) said Friday, March 25, that under his controversial proposed Electricity Reform Bill, which would prioritize state-run companies using carbon-based fuels over private clean energy sources, there will be no government compensation for losses incurred by private-sector suppliers.
In response to concerns expressed by U.S. Trade Representative Katherine Tai, who on Friday met virtually with legislators, businessmen and environmental associations in the United States to discuss recent shifts in Mexico’s energy policy, which she called “worrying” and “regressive,” López Obrador said that while he was willing to negotiate the terms of the self-supply contracts currently in the hands of the private sector, existing contracts with private-sector companies to supply the electricity grid are “far too generous” and “constitute a subsidy.”
He also said that when these “leonine” contracts are cancelled, there will be no financial compensation paid to the companies.
Even U.S. Ambassador to Mexico Ken Salazar, who raised diplomatic eyebrows in February by contradicting the Joe Biden administration and saying that AMLO’s proposed reform is necessary, told the Chamber of Deputies, which is set to approve the bill, that the country must respect all established contracts because “without trust, there will be no new investment in the country.”
In response, AMLO said that he will not defend those who have committed acts of corruption (basically, any company that he deems has profited from private energy contracts), and called on the United States to take a similar stance.
“(Washington) has said that there are going to be sanctions and that the United States-Mexico-Canada Agreement (USMCA) is being violated,” López Obrador argued.
“But that is not the case. We are fighting corruption (by cancelling these contracts).”
Notwithstanding, many foreign-based energy corporations have already stated that if AMLO’s Electricity Reform does pass, they will challenge Mexico in international courts.
Within the USMCA, the14-B Annex specifically states that when indirect expropriations occur, investors can appeal.