[CTC] Mexico’s President-Elect Balks at Including Energy Chapter in New NAFTA

[Arthur Stamoulis]

https://www.wsj.com/articles/mexicos-president-elect-balks-at-including-energy-chapter-in-new-nafta-1534882819 <https://www.wsj.com/articles/mexicos-president-elect-balks-at-including-energy-chapter-in-new-nafta-1534882819>

Mexico’s President-Elect Balks at Including Energy Chapter in New NAFTA
Mexico, U.S. officials in talks to try reach a deal on trade pact in coming days
 
By David Luhnow and Santiago Pérez 
 Aug. 21, 2018
 
MEXICO CITY—A split has emerged among Mexico’s incoming and outgoing administrations over how to handle the subject of energy in ongoing talks to revamp the North American Free Trade Agreement, possibly complicating attempts to reach a deal.
 
The incoming government of president-elect Andrés Manuel López Obrador wants to prevent a new chapter on energy investment from being included in the pact, something the current Mexican team and its U.S. and Canadian counterparts had already agreed upon, according to people with knowledge of the talks.
 
Energy wasn’t included in the original 1994 trade deal because Mexico at the time had a state monopoly in oil and its constitution forbade any private investment in the sector. But in 2013, the government of President Enrique Peña Nieto overhauled the charter to open the industry to private and foreign investment. Mr. López Obrador was against the changes.
 
Since then, dozens of foreign oil companies, including major U.S. ones, have won the rights to drill for oil and gas in Mexico, pledging billions of dollars in investment. The incoming administration has said it doesn’t plan to roll back the changes, but it remains unclear if it will press ahead with any new auctions.
 
Negotiators from the U.S. and Mexico are meeting this week in Washington, D.C., in a last minute dash to get a deal done before the end of this month, giving enough time for lawmakers in Mexico to give approval before Mr. López Obrador takes office in December. Trade negotiators from both countries want to sort bilateral trade issues in the treaty before Canadian negotiators rejoin talks, possibly in coming days.
 
Mr. López Obrador’s team isn’t part of the formal Mexican negotiating team, but current Mexican officials are consulting on trade with the president-elect’s aides, who are in Washington, D.C. as well.
 
A spokesman for Mexico’s Economy Ministry declined to comment. Officials of Mr. López Obrador’s trade team weren’t immediately available for comment.
 
Mexican and U.S. officials have said that the inclusion of an energy chapter in Nafta seeks to cement North America’s energy integration. Mexico is attracting billions of dollars in foreign investment. Foreign companies are also buying gasoline stations across the country, an 800,000-barrel-a-day market.
 
Mexico is also buying increasing amounts of U.S. 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 U.S. trade deficit with Mexico—a key goal of the Trump administration.
 
A Nafta chapter dealing with energy would also allow the Trump administration to claim a big win and would help in selling any Nafta deal to Congress, where lawmakers may object to other parts of the Trump agenda, including weakening or eliminating arbitration panels for U.S. businesses that invest in Mexico.
 
An energy chapter in Nafta would also prevent Mexico from backsliding on the opening of its energy sector at a moment when U.S. companies are seizing a growing role in the local industry, said Carlos Véjar, a trade attorney at law firm Holland & Knight in Mexico City.
 
Scrapping energy from a new deal would likely anger the U.S. side and make any agreement more difficult to reach, pushing talks beyond Mr. López Obrador’s inauguration on Dec. 1.
 
“The energy sector was on the table, but it wasn’t a matter of concern. It was rather a technical issue on how to reflect Mexico’s overhaul in the treaty,” Mr. Véjar said. “Excluding it could change the scope of the negotiation, given that this is the sector that currently has the highest investment volumes.”
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