The White House plans to issue an ultimatum to Mexico in coming days, designed to force Mexican president Andres Manuel Lόpez Obrador (AMLO) to abandon his plans to return to energy protectionist policies that characterized Mexican oil and power for most of the 20th Century.
In an exclusive report, Reuters reported Monday (Mar. 27), “The Office of the United States Trade Representative (USTR) is expected to make what was described as a ‘final offer’ to Mexico negotiators to open its markets and agree to some increased oversight, three people familiar with the talks told Reuters. If not, the U.S. will request an independent dispute settlement panel under the Unites States Mexico Canada Agreement, or USMCA, they said.”
Mexico’s giant state owned oil company, Petroleos Mexicanos (Pemex), has long been at the heart of modern Mexican political history, and the prominence of the left-wing political party, Partido Revolucionario Institucional (PRI), that governed the country from the 1930s to 2000. The PRI in March 1938 expropriated American oil company Standard Oil of its monopoly Mexican operations, almost leading to war with the U.S. That act, and the creation of Pemex, became a potent symbol of Mexican identity over the years.
For an excellent discussion of the rise of PRI and Pemex, in the context of the long history of Mexico, read historian Enrique Krauze’s excellent 1998 book “Mexico, Biography of Power, A History of Modern Mexico 1810-1996.” (Harper Collins). After the expropriation of U.S. oil company assets, Krauze writes, “The oil companies engineered a wide and effective commercial boycott against Mexico, which for a time was obliged to sell its oil to the Axis countries or engineer complicated exchanges….Tension continued with the U.S. government, but for Washington the risks of a confrontation were greater than any possible benefit. On December 7, 1941, when World War II began for the United States, the quarrel over oil effectively ended.”
Populist Lόpez Obrador, a scion of the now diminished PRI, and his own Morena party are now seeking to overturn some recent reforms in the relationship between the country’s oil and electricity sector and the U.S. Reuters reported in January 2019, that “Lόpez Obrador has worked to bolster state oil firm Petroleos Mexicanos (Pemex) and power utility the Comision Federal de Electricidad (CFE), arguing the previous government skewed the market in favor of private companies.”
In 2019, Lόpez Obrador pushed through a vote in the Mexican congress a law increasing CFE’s control of the power market from 38% to 54%. Foreign Policy observed, “It’s the latest round of jousting over a proposed energy reform so controversial it may lead to the biggest conflict yet between Mexico and the United States under the United States-Mexico-Canada Agreement (USMCA), the trade pact enacted in 2020.”
This week’s Reuters account said, “The United States and Canada demanded dispute settlement talks with Mexico in July, 250 days ago. Under USMCA rules, after 75 days without a resolution they were free to request a dispute settlement panel, a third party that rules on the case….If the panel rules against Mexico and it fails to take corrective action, Washington and Ottawa could ultimately impose billions of dollars in retaliatory tariffs on Mexican goods.”
The energy dispute is an important detail of a larger picture of U.S.-Mexico relations. The Washington Post on Monday outlined tensions between the two close, yet politically far apart, neighbors. Among the other issues are immigration, drug trafficking, human rights, and overall Mexican corruption. Lόpez Obrador, the Post wrote, “called a State Department human rights report ‘trash’ and its authors ‘liars.’ He has insisted that his country’s drug cartels do not produce deadly fentanyl, attributing the U.S. opioid epidemic to a lack of hugs from American parents. López Obrador even appeared to hint last week that the Biden administration may have been behind last year’s bombing of the Nord Stream pipeline in the Baltic Sea.
“The Mexican leader’s barbs have left the Biden administration in an awkward place. U.S. lawmakers are clamoring for more pressure on López Obrador over trade disputes, drug trafficking and democratic backsliding. But the Biden administration has made López Obrador a bulwark of its strategy to curb illegal border crossings, depending on him to take back tens of thousands of migrants every month from nations that don’t accept U.S. deportees.”
–Kennedy Maize
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