AMLO government discriminates against private companies to support CFE and Pemex says US lawmakers

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US lawmakers urged the administration of President Joe Biden to redouble its efforts to pressure Mexican authorities to provide companies that operate or trade with Mexico with a level playing field, as envisaged by the USMCA.

The Mexican government “overwhelmingly” discriminates against private companies to support the Federal Electricity Commission ( CFE ) and Petróleos Mexicanos ( Pemex ), 40 US federal legislators recriminated.

For this reason, lawmakers urged the administration of President Joe Biden to redouble its efforts to pressure Mexican authorities to stop “discriminatory actions” and provide US companies that operate or trade with Mexico a level playing field, such as It is foreseen by the Treaty between Mexico, the United States and Canada ( USMCA ).

The message was directed through a letter to Katherine Tai, a trade representative of the White House; Anthony J. Blinken, Secretary of State, Gina M. Raimondo, Secretary of Commerce, and Jennifer M. Granholm, Secretary of Energy. 

We write to express our grave concern over reports on the increasing efforts of the Government of Mexico to exclude private companies from its energy sector in contravention of its international commitments, including the T-MEC, ”the letter reads.

They argue that President Andrés Manuel López Obrador himself has recognized the explicit objective of providing preferential treatment to the national energy companies of Mexico, Pemex and the CFE, “in direct contradiction to the USMCA, which his own administration negotiated and signed”.

Lawmakers questioned that the López Obrador administration and his party ( Morena ) have defended regulatory and legislative efforts that Mexican courts have ruled to be anti-competitive and harmful to the environment.

As such, they added, they are also detrimental to American investment, American workers, and North America’s commitment to sustainability, all of which are concepts protected by the USMCA.

They argued that discriminatory and arbitrary enforcement actions have intensified in recent weeks. Through what appears to be selective use of authority, they have explicitly impeded, and in some cases completely blocked, the participation of the US private sector in Mexico’s fuel markets.

According to media reports, the Mexican government has suspended permits for several US-owned fuel storage terminals, while using the National Guard to force the closure of 23 fuel-related facilities, such as storage sites, and shutdown partial of another 171.

“These actions are just the latest in a broad and sweeping effort aimed at stifling competition from the private sector,” they said.

In June, Mexico’s tax authority amended the General Foreign Trade Rules, prohibiting companies from obtaining or renewing the three-year permits required for fuel terminals to serve as entry and exit points for hydrocarbons.

The same agency suspended 82 fuel trading companies in July for alleged tax violations.

Meanwhile, between December 20, 2020, and July 15 alone, the Mexican Ministry of Energy canceled 1,866 permits for the import and export of gasoline, diesel, LP gas, jet fuel, fuel oil, and crude.

As of September 20, only 97 of the 1,954 permits granted to private companies were active in Mexico.

After listing all these numbers, the legislators said: “Such blatant action in contravention of existing legislation has significant implications for American businesses and workers.”

In 2019, the oil and natural gas industry directly or indirectly supported 11.3 million jobs in the United States and had a national economic impact of nearly $ 1.7 trillion.

In 2020, Mexico was the largest export market for petroleum products in the United States, accounting for 12% of all exports, as well as a growing market for natural gas.

Within Mexico, protectionist policies are recognized as having significant costs. The letter states that the Mexican Business Coordinating Council ( CCE ) has expressed its “deep concern” over the “obstacles to the importation of gasoline to artificially protect Pemex.”

The participation of the private sector would lead to “an artificial and unjustified restriction of the supply of goods and services, harming Mexican consumers.”

Based in part on CFE’s expansion plans, the Mexican government’s National Development Program for the Electric Power System (Prodesen) recognizes that Mexico will not meet its clean energy generation goals.

In 2024, only 32% of Mexico’s electricity matrix will have clean sources, below the 35% share that Mexico had committed to for that year.

“Favoring Pemex could also cause Mexico to violate IMO2020 of the International Maritime Organization and other international environmental commitments, due to the high sulfur content in Pemex fuel oil.

“The CFE has also recognized its choice to use this same fuel oil over natural gas in power plants near the largest cities in the country, such as the Tula plant that provides up to 20% of Mexico City’s electricity.” lawmakers said.

For them, “the overwhelming list of discriminatory actions is long past the point of ‘simply’ raising serious questions about President López Obrador’s commitments to the letter and spirit of the USMCA.”

“In fact, they suggest that the Mexican government is proactively trying to enact policies and take actions that violate and undermine the Treaty,” they concluded.

Source: eleconomista.com.mx

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