The Mexican government continues nationalizing key industries despite US objections
The Mexican government agreed to purchase 13 power plants from the Spanish energy company Iberdrola for $6 billion on Tuesday (April 4), giving its state-owned power company, Commission Federal de Electricidad (CFE), majority control over the country’s electricity market.
Mexican president Andres Manuel Lopes Obrador (AMLO) called the decision part of a “new nationalization” of some of the country’s major industries, including mineral and oil production, according to Reuters.
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The acquisition of the power plants will give CFE control of more than 56% of Mexico’s total production—up from approximately 40%, and surpassing AMLO’s previously stated goal of 54%.
The US and Canada have strongly opposed AMLO’s actions, and have threatened a trade war if Mexico continues to roll back access for international corporations in Mexico’s power and oil markets.
Iberdrola said the power plants would be taken over by CFE within five months as it looks to reduce its operations in Mexican energy markets. The company’s CEO, Ignacio Galan, said that the deal was a win-win.
“That energy policy has moved us to look for a situation that’s good for the people of Mexico, and at the same time, that complies with the interests of our shareholders,” Galan said after a joint appearance with AMLO announcing the deal.
AMLO has repeatedly compared Iberdola’s power over Mexican resources to Spanish conquistadors of the 16th century, even threatening to pause diplomatic relations with Spain over perceived neo-colonial actions by foreign energy firms.
AMLO invokes the history of the Mexican Revolution
Less than a month ago, more than 500,000 people flooded Mexico City to commemorate the 85th anniversary of the nationalization of the oil industry by president Lázaro Cárdenas del Río in the aftermath of the Mexican Revolution.
AMLO addressed the crowd, promising to carry on Cárdenas’s legacy, specifically highlighting his decision to nationalize the country’s energy and mining sectors, including Mexico’s burgeoning lithium reserves in the Sonora desert.
“Mexico is an independent and free country, not a colony or a protectorate of the United States,” AMLO said in a forceful rebuke of American influence in the country’s economy. “Cooperation? Yes. Submission? No. Long live the oil expropriation.”
This type of populist rhetoric has been a major part of AMLO’s strategy throughout his presidency. Since his election in 2018, AMLO has sharply criticized foreign business interests in Mexico—specifically those of American companies, portraying its northern neighbor as a threat to Mexico’s economic sovereignty.
What is the American position?
Tensions have risen between the US and Mexico surrounding AMLO’s increasingly isolationist actions. According to a Reuters report, the Biden administration plans to give the Mexican government an ultimatum in the coming weeks, asking Mexico to open its energy markets to American companies or face trade tariffs.
Specifically, the US will request an independent dispute settlement panel under the United States Mexico Canada Agreement (USMCA), the trade deal that succeeded NAFTA in 2020.
In the energy sector, the Biden administration has accused AMLO of favoring state oil company Petrleos Mexicanos—as well as the CFE power utility—and discriminating against US companies, a perceived violation of the USMCA.
The US has also been involved in a trade dispute with Mexico on the import of genetically-modified corn after AMLO called for a ban on all genetically modified agricultural products, citing health risks. The US—which exports 17 million tons of mostly genetically modified corn to Mexico annually—accused Mexico of violating the USMCA and threatened trade retaliation if Mexico stopped allowing farmers to buy its corn.
AMLO has been unapologetic on both fronts, describing a vision of a self-sufficient Mexico in his 2019 inauguration speech. He has repeatedly declared America’s economic and political dominance as modern-day imperialism, endearing him to his left-wing political base and giving him the second-highest approval rating of any world leader.
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