U.S., Canada, and Europe are concerned about Mexico’s energy policies

The United States , the European Union , Canada , and six European nations have held talks to discuss their concerns over Mexico’s new energy policy as P resident Andrés Manuel López Obrador aims to give the government a bigger role in the industry .

The unusual diplomatic encounter shows how López Obrador’s break with the energy policy implemented by Enrique Peña Nieto is worrying economies that have traditionally been some of Mexico’s biggest foreign investors .

U.S., Canadian, and European officials privately voiced their concern that Mexico’s energy policy is affecting the legal foundations of contracts worth billions of dollars with the previous administration, in what they fear is a creeping squeeze-out of their interests.

Mexico’s government denies it is undermining those deals but says prior contracts were often damaging to the country and has sought to renegotiate the terms of some.

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On March 6, officials met at the U.S. embassy in Mexico City. In the meeting, diplomats from Britain , Canada , the EU , France , Germany , Italy , the Netherlands , and Spain discussed their concerns and how best to relay them to López Obrador .

Asked for comment, the U.S. embassy told Reuters that it did not discuss its diplomatic conversations . The other foreign embassies did not reply to requests for comment, nor did López Obrador’s office.

Details of what happened at the meeting were not immediately clear, although there was discussion about whether to make it public, said one person. All the sources spoke on the condition of anonymity, due to the sensitivity of the matter.

Diplomats say foreign governments differ in their opinions of how openly to communicate their worries to López Obrador, lest he feels he is being pushed about and ends up taking a more hardline approach .

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López Obrador has committed himself to strengthen the state’s role in the energy sector, arguing that past market liberalization and privatization of other industries deepened inequality and encouraged corruption .

Broader concerns over López Obrador’s economic policies sapped investment in Mexico in 2019 and contributed to a slowdown that pushed the economy into a mild recession .

Companies from around the world pledged to invest billions of dollars in Mexico under constitutional changes, implemented by Peña Nieto, to open up the energy market , in particular for oil and gas.

López Obrador has put the brakes on that liberalization process, saying it has not resulted in benefits for Mexico.

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One particular dispute centers on who has the right to operate a major offshore crude discovery in a reservoir straddling areas held by state oil firm Pemex and a U.S.-led consortium of private investors.

In 2019, López Obrador’s government also upset some countries by threatening to tear up about USD $12 billion in contracts agreed under Peña Nieto for construction of several natural gas pipelines , arguing they ripped off taxpayers . However, that dispute was eventually resolved.

Government steps to strengthen the state power utility CFE have reduced incentives for private capital to enter renewable projects , further halting investor confidence in Mexico.

Some of the money tied up in energy investments in Mexico is linked to pension funds in Europe and North America . Critics of the government’s policies worry that diminishing returns on those Mexican energy investments may hit pensioners .

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