Economy, energy row and drugs loom at North American summit

By Dave Graham

MEXICO CITY (Reuters) - North American leaders aim to give new impetus to strengthening economic ties at a meeting this week, even as a major dispute grinds on over Mexico's energy policies which has distracted from cooperation on other issues like immigration.

Mexican President Andres Manuel Lopez Obrador will host his U.S. counterpart Joe Biden and Canada's Prime Minister Justin Trudeau for talks in Mexico City from Monday through Wednesday, the first summit between the three since late 2021.

"A meeting like this is so that we keep moving forward on economic integration," Lopez Obrador said this week.

Still, Mexico remains mired in an energy dispute with the United States and Canada, who argue their firms have been disadvantaged by Lopez Obrador's campaign to give control of the market to his cash-strapped state energy companies.

A combative leftist, Lopez Obrador says his policy is a matter of national sovereignty, on the grounds that past governments skewed the energy market to favor private interests.

Washington and Ottawa believe his actions breach the United States-Mexico-Canada (USMCA) trade deal, and have launched dispute resolution proceedings against Mexico, souring the mood for cooperation over jobs and investment.

Trudeau told Reuters on Friday he would make the case that resolving the energy dispute would help bring more foreign investment to Mexico, and was confident of making progress.

Others argue the time for negotiation is over.

Aindriu Colgan, director of tax and trade policy at the American Petroleum Institute - whose members include ExxonMobil and Chevron - said it was time to call a dispute panel because "Mexico is blatantly violating the USMCA."

Ahead of the summit, officials have publicly stressed North America's shared economic interests, while privately tempering prospects for a major breakthrough on the energy spat.

"They will do their utmost to make it appear a happy gathering," said Andres Rozental, a former Mexican deputy foreign minister. "As long as Lopez Obrador keeps migrants out of the border area, Biden will be happy."

SNUBS, FENTANYL, IMMIGRATION

Since the COVID-19 pandemic scrambled supply chains, policymakers have stepped up calls for firms to relocate business from Asia to make the region's economy more resilient.

As part of that drive, Lopez Obrador, who in June snubbed Biden's invitation to the Summit of the Americas in Los Angeles in protest at his exclusion of the leaders of Cuba, Venezuela and Nicaragua, wants to discuss his plan to boost solar power in northern Mexico and secure U.S. financial support for it.

Biden's aides say they expect a positive tone at the gathering after the announcement of a new migration plan this week, and Mexico caught a prominent cartel boss.

Ovidio Guzman, son of jailed kingpin Joaquin "El Chapo" Guzman, is a leader of the Sinaloa Cartel, a gang blamed for helping to fuel a surge in fatal overdoses of synthetic opioid fentanyl in the United States.

The U.S. government said stopping fentanyl flows would be an important part of talks on combating drug cartels. Supply chains, climate change and immigration would also be discussed.

A U.S. official, speaking on condition of anonymity, said any tensions over Lopez Obrador's June snub had dissipated and the two presidents were in a better position to work together.

Mexico's government has repeatedly urged the United States to commit funds to Central America and southern Mexico to boost development and stem the northward trek of migrants from what has long been one of the poorest regions on the continent.

It has also urged Washington to make it easier for migrants to get U.S. jobs. A Mexican official said the deal unveiled on Thursday broadening border expulsions would do that due to a quid pro quo it contained on facilitating migrant entry by air.

Mexico has recently also raised U.S. hackles with a plan to prohibit imports of genetically modified corn. Although Lopez Obrador's government agreed to delay the ban until 2025, the issue would be discussed, he said.

(Reporting by Dave Graham, Jarret Renshaw, Matt Spetalnick and Steve Scherer; Editing by David Holmes)