The energy reform approved by the Chamber of Deputies on October 9 and which is pending a vote in the Senate, must respect the disciplines of the treaties to which Mexico is a party for a legal issue, but also for the competitiveness of the country, since this will serve to expand trade and investment if a credible commitment to its disciplines is demonstrated, warned the Mexican Institute for Competitiveness (IMCO).
In the document “The energy reform must awaken the TMEC”, the IMCO indicated that the implementation of the constitutional changes must be in line with the country’s needs in terms of decarbonization and energy transition, as well as promoting lower electricity costs to promote competitiveness and consider budgetary constraints on public finances.
He indicated that the constitutional reform maintains ambiguous wording, so after its eventual approval in the Senate of the Republic it is necessary to ensure that secondary legislation is prepared taking care of congruence with the provisions embodied in the Mexico-United States-Canada Treaty ( TMEC), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TIPAT) and the modernization of the trade component of the Mexico-European Union Global Agreement, as well as the rest of the trade and investment treaties to which Mexico is a party.
The IMCO recalled that the review of the USMCA, which will take place in 2026, forces Mexico to be prepared to defend the coherence of its public policies with its provisions. In this sense, Mexico must ensure the consistency of the new legislation with the following chapters of the T-MEC.
He specified that in Chapter 12 of the USMCA (Cross-border trade in services), although electricity generation is not considered a service, the principles of most favored nation treatment and national treatment in matters of services, as well as the market access provisions, are apply to the supply of electrical energy, so secondary legislation must define the scope of the concept of “prevalence” on the Federal Electricity Commission (CFE) to determine if it includes the electrical supply.
In Chapter 14 (Investment), the “ratchet clause” establishes that, if a country opens its economy by allowing more trade or foreign investment, it will not be able to roll back those measures in the future or close sectors previously open to private participation, so introduce new restrictions for private companies in the energy sector could generate a conflict.
Meanwhile, Chapter 22 (State-owned companies) establishes that state-owned companies must operate under commercial criteria and that the administrative bodies that regulate state-owned companies (including those in the energy sector) must be impartial and the transit of State productive company to public company could be incongruent with these provisions.
Chapter 24 (Environment) states that a country can be brought to a panel and sanctioned if a sustained and recurring violation of domestic environmental legislation is proven in such a way that it affects trade and investment. In this sense, any change to the electricity dispatch criteria must be consistent with the emissions reduction objectives set forth in national legislation on climate change and energy transition.
Finally, in Chapter 32 (Exceptions and general provisions) Mexico undertakes to grant the least restrictive measures regarding investment, cross-border trade in services, and state-owned companies and designated monopolies.
These measures must be adopted or maintained in accordance with the terms of the applicable reservations and the exceptions to parallel obligations included in trade and investment treaties that Mexico ratified before the entry into force of the USMCA. The energy sector is fully incorporated into the TIPAT, ratified prior to the USMCA, so it forms an integral part of this treaty.
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