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In an interview with BNamericas, Lisa Viscidi, director of the Energy, Climate Change and Extractive Industries program at the Inter-American Dialogue, discusses president-elect Joe Biden’s victory and how it might impact the US-Mexico energy relationship.
READ THE FULL INTERVIEW FROM BNAMERICAS BELOW.
The recent victory of Joe Biden in the US presidential elections may help redefine the country’s relationship with neighboring Mexico, especially in the energy sector.
While president-elect Biden prepares to face a number of major domestic challenges, including the rising number of COVID-19 infections and a highly polarized political environment, he has outlined foreign policy changes to promote clean energy investment and cultivate international partnerships, especially in Latin America.
The outgoing administration of President Donald Trump put the accent on immigration issues when it came to Mexico. According to Viscidi, a Biden administration is set to establish a new relationship with Mexico with a focus on broader issues, where the energy sector will play a key role.
“A new administration will want to take a more collaborative approach and climate change and clean energy will be one of the important items on the bilateral agenda. The Biden administration could look for ways they can incentivize Mexico and encourage it to have policies that are more favorable towards renewable energy,” Viscidi told BNamericas.
Since taking office in 2018, Mexican President Andrés Manuel López Obrador (AMLO) has pursued a nationalistic strategy in the energy sector by increasing support for public utility CFE and NOC Pemex, adjusting regulations and providing financial aid in a bid to shore up the two companies.
This support has had the side effect of sidelining private producers, especially in the electric power sector and to a lesser extent in the oil and gas industry. In Mexico, private players are the main investors in renewable technologies, while CFE trades mostly in thermal and hydroelectric generation.
However, this vision is not necessarily incompatible with a more active promotion of renewables, according to Viscidi. “The central tenant of his energy policy is not anti-climate change, it’s pro-state,” she said.
Viscidi also said that AMLO has a clear policy vision for Mexico which no foreign country is likely to change.
“I think there are new opportunities for collaboration if there can be areas that are mutually beneficial. For example, CFE has a lot of outdated technology so it may need and want to partner with the US, with private companies to purchase clean technology,” she said. Another area of mutual gain would be strengthening electric power interconnection between both countries.
AMLO’s rule changes to the electric power sector have been particularly controversial with investors. They include policies enacted by energy ministry Sener and grid operator Cenace to forbid renewable projects from connecting to the grid on the grounds they would reduce the system’s safety during the COVID-19 pandemic.
AMLO has also met repeatedly with heads of independent regulatory bodies and asked them to take measures to favor state-owned firms. So far, most of these policies have been blocked by local courts, prompting the government to consider pursuing deeper legal and constitutional changes to enact its agenda.
The discussion has recently centered around whether the USMCA trade agreement between Mexico, the US and Canada, which came into effect in July, provides protections for US investors affected by these changes.
BNamericas also talked with Viscidi about this and other issues related to USMCA and the US-Mexico energy relationship.
BNamericas [BNA]: Do you see the USMCA facing any changes after the US change in power? Would the agreement help protect private investors who have been affected by the policies enacted by AMLO?
Lisa Viscidi [LV]: I don’t think that there’s going to be any interest in renegotiating the USMCA. That was an effort where the two parties came together in Congress, the Democrats got a lot of the changes that they wanted on environmental and labor provisions, so even though the Biden campaign said climate change would be a part of trade agreements going forward, I don’t think there would be a renegotiation of the USMCA.
There’s already been some concern raised about how the policies of the AMLO government could violate the terms of the USMCA. Just recently there was a letter from both parties of Congress criticizing the policies and saying they could violate the trade deal. There’s concern in Congress in both parties that this does potentially violate the USMCA provisions.
I think this will be led more by the private sector trying to use whatever legal abilities they have through the USMCA, whatever protections they have, and that’s something that has had an impact, the legal battles have been very successful in halting a lot of the changes to the electricity policies. I think we’ll see more of that. And maybe more vocal discussions about how that violates the trade agreement. But I think that would be mostly led by the companies, which are the ones that need to open up the respective court cases.
BNA: How could the change of president affect the energy relationship with Mexico? Do you think new opportunities will develop?
LV: Despite all of the new policies [enacted by the current Mexican administration], the trade relationship in energy is only getting more important and stronger, and if anything it could even grow, so we’ll continue to see the gas, crude and refined products trade be very strong.
Even though at the highest levels the AMLO government is very state-centered and I don’t think that approach is what anyone in the US, either in the presidency or in Congress in both sides of the aisle agrees with, I do think there could be a lot of opportunities more at the technical level for cooperation between the two governments.
That could also provide openings for more dialogue. It’s something that happened more frequently under the Obama administration, there was a lot more cooperation at the technical level between the US and Mexico on energy issues, that really died down during the Trump administration and is something that could be revived.