Andrés Manuel López Obrador received the support he had hoped for last month in a popular poll covering the first three years of his presidential sexenium (2018-2024). Mexico’s president won at least 92% of the vote, meaning only 20% of the electorate participated, and registered his highest popularity index during his presidency of 66.7% in a poll taken in March.
This is an impressive degree of support given the severity of the pandemic and the economic crisis, which has further swelled the ranks of the poor. The Mexican economy did not grow during the first three years of López Obrador’s presidency.
The AMLO problem is not on the streets and in bars, but in business centers
The problem for the president, known as AMLO, is not public opinion on the streets and in the cafeterias, but the opinion of the business community and media headquarters in Mexico as well as in Washington DC, Brussels or Madrid. Not to mention the Texas oil city of Houston. In these world centers of power, for several months now there has been an offensive against the government’s plans to strengthen the Mexican state as a pillar of the economy in strategic industries. For globalization advocates, López Obrador is guilty of the crime of “resource nationalism.”
In the most strategic sector, energy, the counterattack on López Obrador’s plans to bolster two large state-owned companies, the oil company Pemex and the state-owned electricity company, the Federal Electricity Commission (CFE), has just won its first victory.
A bill put forward by Morena’s AMLO party to reduce the capacity of multinational electric companies, some of which are Spanish, and increase CFE’s market share, has just been defeated by Congress. He did not win the two-thirds of the votes needed to make the constitutional changes required by law. The defeat, which AMLO called “treason”, came after an intense campaign against the law in the United States and Europe.
Bill that tried to reduce the power of electricity monopolies failed in Congress
The rejected law would have voided contracts under which 34 private stations, most of which are operated by European multinational corporations, sold electricity to the national grid. He would call “illegal” 239 other private power plants that sell power directly to corporate customers in Mexico, who then own the power plant, in what is called self-supply.
The vote is a symbolic defeat for the veteran leader of the Left. But perhaps most surprising to many AMLO voters, those who identify as environmentalists, is the fact that their government has chosen to defend a fossil fuel-based energy generation model. Meanwhile, Washington and the private electricity multinationals are defending a shift in the energy matrix in favor of renewables. Nearly all of the factories the government wants to eliminate use renewable energy or natural gas instead of more polluting fossil fuels like the heating oil used by CFE.
“For the government, energy is a strategic sector, and the state should control it; it takes precedence over diversifying the energy matrix,” said José Luis de la Cruz, director of the Industrial Development Institute in Mexico City. “Reducing emissions in practice is not a priority.”
Biden administration reacts with hostility to AMLO bill
The Biden administration has criticized López Obrador’s plan because it would force U.S. companies based in Mexico to buy dirty energy, hindering their efforts to reduce their carbon footprint. “The reform proposed by the Mexican government is detrimental to U.S. investment and could interfere with joint U.S.-Mexico efforts related to clean energy and climate,” U.S. Energy Secretary Jennifer Big Wave said days before the vote.
CFE, whose CEO Manuel Bartlett, former Minister of Governments of the Institutional Revolutionary Party (PRI), which AMLO calls the “power mafia”, says it intends to invest in renewable energy and reach 35% renewable energy. in 2024. But “a weak financial position will prevent him from doing so,” Pamela Starr of the American consulting firm Monarch Strategies told a roundtable at the Inter-American Dialogue think tank in Washington. “The CFE Treaty does not have the financial resources for new investments,” de la Cruz agrees.
Pemex’s plan to centralize all oil refining has sparked controversy across the border.
At the same time, AMLO’s plan to strengthen Pemex and refine all Mexican oil at domestic facilities or Pemex-owned US refineries has raised eyebrows in the Texas capital of Houston. Pemex caused a lot of controversy when it bought Shell’s historic Deer Park refinery last year in a highly symbolic blow to the state, which was separated from Mexico after General Sam Houston’s victory over the Mexican army at the Battle of San Jacinto in 1836. In general, the same battle is depicted on a huge hyper-realistic mural painted on the tanks of an oil refinery.
This acquisition allowed López Obrador to reclaim the legacy of legendary President Lázaro Cárdenas, who nationalized the Mexican oil industry in 1937 by expropriating companies such as Standard Oil and Royal Dutch Shell. But control of a Texas-based refinery that is still dependent on US imports is hardly an achievement in Mexico’s energy security.
A lack of resources prevented the government from strengthening Pemex’s balance sheet.
The construction of another new refinery in Las Bocas, Tabasco, is a more consistent commitment to petronationalism and energy sovereignty. But the high cost of the refinery, already budgeted at $12 billion, 50% more than expected, has derailed government plans to increase investment in Pemex, the world’s most indebted oil company. That is if AMLO managed to reduce the traditional abuse of Pemex as a source of funding for the historically wasteful Mexican state by cutting the rights the oil company pays to the state from 70% to 45% of its bills.
AMLO’s decision to cancel the transfer of oil fields in the Gulf of Mexico to oil multinationals caused even more outrage in Houston. “This is a vanity project. No one benefits less from it, and it brings safety and environmental concerns to Houston,” says George Baker, author of the Houston Oil Industry Newsletter.
Wall Street and Houston fear that the AMLO plan violates free competition.
But more than protecting the environment, Wall Street and Houston are concerned that the AMLO plan violates the free competition provisions of the new T-Mec North American Free Trade Agreement. After opening up the energy market to foreign capital for the first time thanks to former PRI President Enrique Peña Nieto’s energy reform, a massive privatization and liberalization program designed in collaboration with US consultants, AMLO dared to retreat. “What’s worrying is what they call the zipper factor: once you open it, you can’t close it again,” said a business newspaper editor in Mexico City.
Geopolitical factors also play a role. Washington is increasingly concerned about AMLO’s nationalism over energy resources at a time of heightened uncertainty over oil and gas sources, given the possible cut off of supplies from Russia.
Mexico’s refusal to join sanctions against Russia irritates Washington
Mexico’s refusal to join sanctions against Russia is another source of irritation in Washington. The decision of the Morena party to create a committee of friendship with Russia was perceived very negatively. Andres Oppenheimer, the Hispanic columnist closest to Biden’s State Department, called López Obrador’s refusal to join the sanctions “pathetic” and “Jurassic Left.” “The bloc of the US, Europe, and Japan … will become increasingly reluctant to rely on countries they cannot trust in the political arena,” Oppenheimer warned in the Miami Herald.
Despite everything, Lopez Obrador did not give up in the battle for energy. In the oil sector, the government expropriated the Houston-based Talos exploration company, which, following the liberalization of Peña Nieto, secured a field in the Gulf of Mexico with a potential production equivalent to $10 million a year.
In the electricity sector, even without the support of the new law, the president “is not going to issue more tenders (…) he will use the legal framework to restrict the private sector, and this uncertainty will prevent the companies themselves from investing.” de la Cruz said. “The supply car is a scam and it’s illegal; I can’t close my eyes because then I would be an accomplice,” AMLO said at Monday’s morning conference call.
Mexico will also force the state to develop lithium reserves.
He also just announced that the lithium deposits in the Sonoran Desert, needed to produce batteries in a zero-emission economy, should be operated by the government and not by the private sector. “There can be no concessions to private interests, especially foreign ones,” the president said. Termination of the contract with the Chinese company Ganfeng Lithium will be studied.
Lopez Obrador feels that justice is on his side. He denounced the kinship between previous governments and multinational corporations in the electricity, oil and construction sectors. Spain’s Iberdrola, for example, has brought former president Felipe Calderón and former energy secretary Georgina Kossel to the board of directors of its US subsidiary.
Luxurious residence of AMLO’s son in Houston haunts the President
The resource nationalism of AMLO gave rise to reasons to look for more or less real scandals to attack the president. One of them was set in Houston. A journalistic investigation into the palatial home in the US oil capital, where the president’s son lived from August 2019 to July 2020, was used earlier in the year by AMLO’s political and media opponents to arouse suspicion of a possible human trafficking crime. affects.
The alleged scandal, already known as the “Gray House,” a 450-square-meter building on the outskirts of Houston with an Olympic swimming pool, caused a minor hit in AMLO’s popularity in January, when a photo essay about the Houston House was published by Latin US, a Mexican-American digital media outlet, and a Mexican NGO. organization against corruption and impunity (MCCI). A number of accusations have been made that her son’s house contrasts with López Obrador’s constant calls for austerity. The scandal made headlines and was exploited by opposition parties such as PAN, who even hired a Lego model of the gray house in Congress. But since then, this topic has gone out of the media, and the president’s popularity has returned to its previous level.
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