On April 28, the government of Andrés Manuel López Obrador concluded the process of modernizing his trade agreement with the European Union (EU). In other aspects, Two new chapters were incorporated into the treaty in force since 2000 to strengthen investment protection and promote sustainable development with “green” economies.
However, on May 15, without having consulted the private actors, The Ministry of Energy published a new regulation for the electricity sector in Mexico in order to guarantee “system reliability” during the pandemic. That reform strengthens state control and the use of fossil fuels and it puts a brake on the development of renewable energies, mainly wind and solar, damaging the investments of European companies.
In an unusual way, The EU Delegation in Mexico (on behalf of 19 of its 27 member states) delivered a letter to the Secretary of Energy, Rocío Nahle, where she expressed her “deep concern” for “the decisions taken in the renewable energy sector”. The diplomatic representation warned that The new rules “would negatively impact” 44 projects in 18 states of the Republic and would put investments, including European ones, at risk of more than $ 6.4 billion.
Beyond the multiple accusations of abuse that European firms in that industry incur in Mexico, the abrupt decision of the López Obrador government to ban new renewable energy plants to benefit the plants of the Federal Electricity Commission (CFE), which consume expensive and highly polluting fuel oil produced by Pemex, contradicts the spirit and letter of the agreement who signed with the EU and that it must still be approved by the governments and parliaments of that region.
In the first article of the public version of the new chapter on “Trade and sustainable development”, Mexico pledged to “promote” “green and inclusive growth”, that is, low carbon emissions, efficient use of resources and socially inclusive. He also recognized that the country has to move towards a “circular economy”, so called because it limits non-renewable resources and eliminates waste production as much as possible.
The Mexican government also agreed to “consult and cooperate” with the EU “on trade-related environmental issues of mutual interest”, and “regularly exchange information on their initiatives” in this area.
Furthermore, always in the available version of the document, the Mexican authorities revalidated their promise to “effectively implement” the United Nations Framework Convention on Climate Change and the Paris Agreement for the reduction of greenhouse gases that, among Other sources emit fossil fuels. And they reiterated in the same chapter that they would promote “the growth of the green economy”, in particular through “renewable energy and efficient energy solutions”.
Faced with pressure from public opinion, that chapter was widely publicized by the EU as proof that Mexico had admitted its responsibility in combating global warming and in respecting related labor and social rights, but environmentalists have never considered it a serious commitment since there is no legal obligation to abide by it.
German Green Member of the European Parliament, Anna Cavazzini, has warned that the agreement with Mexico “does not meet the standards” of sustainable development and other topics because it does not go beyond the sayings, so your political group will vote against an expected approval.
Far from the will expressed on paper and in a risky bet, President López Obrador has accused his European partners of having “seized” the Mexican energy sector and “conspired” against Pemex and the CFE, and has challenged them to sue the Mexican State.
The Dutch Research Center Transnational Institute refers that Mexico, with more than 30 cases since 1997, is among the 5 countries in the world most sued by foreign investors in international courts. Just over half of the rulings have favored private investors.
Of the total of the plaintiff companies, 7 were European (5 Spanish and 2 French) that supported their complaints in the bilateral investment treaties that they maintain with Mexico. For example, in 2009 the Spanish Abengoa went to international arbitration for the closure of a hazardous waste plant in the state of Hidalgo. The Mexican State ended up paying $ 45 million four years later.
Attorney Bernardo M. Cremades Jr., partner in the Spanish firm Cremades & Asociados, specialized in investment protection arbitration, In this case, it does not give the Mexican government much chance of success before an international tribunal.
In an interview with the digital newspaper Vozpópuli, Cremades explained that affected companies could evoke bilateral investment protection treaties that oblige Mexico to offer foreign investors “a stable legal framework, not to act arbitrarily or inconsistently and to protect the legitimate expectations of investors, in addition to requiring them to act in good faith and with transparency and grant effective legal protection and basic procedural rights. ”
The lawyer stated that “The measures against renewable energy imposed by Mexico could have violated several of these elements.” It will be difficult, he says, for the López Obrador government to prove in an arbitration court that its reform is in the “public interest” when the global trend is to increase renewable energy.
* Journalist specialized in Mexico-European Union relations
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