NAFTA: Mexican Pres. Opposes Addition of Energy Chapter

Mexican President-elect Andrés Manuel López Obrador (AMLO) does not want Mexico’s oil industry to be a part of the revamped North American Free Trade Agreement (NAFTA).

Mexico, the US, and Canada had already agreed to add a new chapter on energy investment to the trade deal, but that was before AMLO won the election in July. His opinion could throw a wrench into NAFTA negotiations, which began in August 2017. 

The 1994 version of NAFTA didn’t include energy because Mexico had a state monopoly in oil. In 2013, President Enrique Peña Nieto opened Mexico’s oil sector to private and foreign investment. The change attracted dozens of foreign oil companies, including major US businesses, which earned the rights to drill in Mexico.

The industry opening was controversial in light of a 1938 decision to expropriate oil fields from American and British companies. The nationalist move made ownership of Mexican oil an issue of sovereignty; nowhere was this sentiment stronger than in Obrador’s home state of Tabasco, where politicians begged lawmakers not to give the nation’s resources to foreigners.

AMLO still opposes the change, and negotiators are scrambling to finalize a deal so that it can be approved before he takes office in December. 

But even if outgoing President Nieto signs a new NAFTA, it will be up to a Senate controlled by AMLO’s allies to pass it and to the new president to implement it. That means the deal has to be something both sides can accept. 

As it stands, the new energy rules would cement North America’s energy integration and give extra protection and assurance to existing investments in Mexico.

AMLO and his leftist colleagues oppose these changes, while others warn that making new demands this late in the game could undo the past year of talks just as the US and Mexico make progress on agriculture and cars and come close to finishing a full deal. 

As noted in The Wall Street Journal, “Mexico is also buying increasing amounts of US natural gas and refined oil products such as gasoline, and foreign oil companies arriving in Mexico are buying imported equipment and machinery, helping narrow the US trade deficit with Mexico – a key goal of the Trump Administration.”