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How Claudia Sheinbaum Could Change Mexico [1]

['Kate Aronoff', 'Aaron Regunberg', 'Donald Braman', 'Heather Souvaine Horn', 'Liza Featherstone']

Date: 2024-05-31

Private investors may also be angry, since they stand to lose market share to state-owned competitors. Though the U.S.-Mexico-Canada Agreement excised many of the dubious investor-state dispute settlement clauses found in its predecessor—the North American Free Trade Agreement, or Nafta—investors in Mexico’s energy sector are still eligible to sue the state for infringing on their expected profits. Fourteen of the 16 claims brought against governments under the USMCA have been brought against Mexico, many of them asserting that the government’s preference for state-owned generation unfairly targets their own, cleaner energy projects. The U.S. itself, in 2022, requested “consultations” under that treaty in the name of the climate, alleging (among other things) that amendments to Mexico’s electricity law would “prioritize the distribution of CFE-generated power over cleaner sources of energy provided by private sector suppliers, such as wind and solar.”

How the U.S. might react to a state-led energy transition—and how successful that transition will be—remains to be seen. The more immediate concern for a Sheinbaum government over trade with its northern neighbor relates to a country very far away from either: China. As the U.S. implements increasingly punitive tariffs on Chinese electric vehicles, semiconductors, and renewables, that is, politicians here have fretted that Chinese firms will see Mexico as a place to sneak their products into the U.S. under the auspices of its free trade partner just to the south. Given that the United States is Mexico’s most important trading partner, AMLO’s government has trodden carefully on this front, declining, for example, to extend incentives like cheaper land and tax breaks to Chinese automaker BYD as it looks to build a plant there. In any case, Mexico stands to see considerable investment as companies look to chase U.S. clean energy incentives requiring that an escalating percentage of components to green technologies, including E.V.s, be sourced either in the U.S. or from countries with which it has a free trade agreement.

Romero stressed that Sheinbaum’s government would be keen to avoid Mexico being merely a source of cheap labor and resources in the energy transition, for companies either from the U.S. or who are looking for ways to access that market. “We want to have high-paying jobs here,” he told me. “We lived through that with the first wave of ‘nearshoring’ with Nafta. Very high up on the agenda is to invest in technology and basic science. It’s going to be an industrial policy more like the Entrepreneurial State,” he said, referencing Mariana Mazzucato’s 2011 book on the central role of governments in fueling innovation. “The state must take risks. The state must be a de-risking agent, but also the state must grow capacities in the public sector.”

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[1] Url: https://newrepublic.com/article/182099/claudia-sheinbaum-mexico-president-climate-scientist

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