A key plank in Morena and Andrés Manuel López Obrador’s struggle to transform Mexico involves reversing the neoliberal assault on the country’s natural resources through massive privatization schemas. The difference between the conservative and progressive approach on energy policies couldn’t be clearer. Progressive U.S. journalist and analyst Kurt Hackbarth looks at what’s at stake.
AMLO Is Fighting to Make Mexico’s Energy a Public Resource
By Kurt Hackbarth
Over the last thirty years, resource-rich Mexico has had its energy grid handed over to corporations and foreign multinationals — when it should be in the hands of the Mexican people. Andrés Manuel López Obrador is trying to reverse that trend by bringing back the nation’s long-debilitated public energy sector.
Mexico’s president Andrés Manuel López Obrador speaks during a press conference after Northern Mexico experienced blackouts as several power plants faced natural gas supply failures from Texas, where a freeze left millions of users without lights, on February 18, 2021. (Ismael Rosas/ Eyepix Group/Barcroft Media via Getty Images)
On the night of February 14, a winter storm wreaked havoc with Texas’ deregulated electrical grid, leaving millions to cope with days of power outages, burst pipes, food shortages, and, as a capper, astronomic energy bills that spiraled for some into the tens of thousands of dollars. The images were stark, with the downtowns of cities like Austin lit brightly while residents on darkened peripheries melted snow and icicles for drinking water.
The blackouts quickly spilled over the border into Mexico. Cut off from its supply of natural gas, and facing their own spate of freezing temperatures, some 4.6 million residents of the states of Sinaloa, Nuevo León, Chihuahua, and Tamaulipas braved outages of their own. The crisis was a stark reminder of how decades of failed policies have made Mexico dependent on private energy production, domestic and imported, precisely at a moment when Andrés Manuel López Obrador (AMLO) is signing key legislation to strengthen the hand of the nation’s long-debilitated public energy sector.
Bleeding It Dry
Mexico is a nation gifted — or cursed — with abundant natural resources: oil and natural gas reserves along the Gulf Coast, water in Chiapas, lithium in Sonora, strong and constant winds in the Isthmus of Tehuantepec, and nationwide sunlight that is ripe for solar harvesting. So what, in God’s name, is it doing importing natural gas from Texas?
Over the last thirty years, successive administrations have, step by step, cracked open Mexico’s energy grid to the depredations of domestic corporations and foreign multinationals. Beginning with the initial wedge of small-scale energy production for “self-sufficiency” in 1988, the legal framework was expanded four years later to allow for independent production, cogeneration, import, and export. In the year 2000, 484 megawatts of energy were being produced by the private sector; by 2012, following the terms of Vicente Fox and Felipe Calderón, that figure had swollen to 85,000 gigawatts. Today, private energy production accounts for nearly half of Mexico’s energy supply; in the northeast, where the blackouts occurred, it accounts for 80 percent.
In order to justify the influx of private energy, public infrastructure has been degraded, denuded, and dismantled. The nation’s oil-refining capacity was left to deteriorate to the point that, when AMLO came to power, no new refineries had been built in forty years and not one of the existing six was operating at even close to capacity. This put Mexico in the position of having to ship its oil to the United States and buy it back as gasoline, turning it, in the process, into the world’s second-largest gasoline importer. Meanwhile, oil bandits known as huachicoleros were systematically bleeding oil ducts to the tune of $3 billion dollars a year in losses.
As for the nation’s natural gas, it was left to be literally burned into the air while successive governments negotiated sweetheart contracts to import gas from abroad, locking in long-term deals to bind future administrations. Absurdly, this even occurred with countries that have no natural gas of their own, such as Felipe Calderón’s 2007 deal with the Spanish conglomerate Repsol, which acquired the gas from Peru and imported it to Mexico at a hefty markup (the Calderón administration also acquired 10 percent of Repsol stock several years later through the state oil company PEMEX, only to sell off the shares at a massive loss). To this day, Mexico continues to burn off up to a fifth of the natural gas it produces.
This deliberate sabotaging of public capacity has other side effects as well. In October of last year, heavy rains in the State of Tabasco led to severe flooding, leading to the difficult decision to close a sluice that protected the capital city of Villahermosa at the cost of rerouting water to rural, indigenous areas. But the primary reason there was so much water in the first place was that the region’s hydroelectric plants were only being used to supply energy to one small area of the country: the Yucatán Peninsula. Due to the forced underutilization of the plants, the buildup of water was a ticking time bomb just waiting to overflow.
AMLO’s “Fossil-Fuel Fixation”
The Electric Industry Act, signed into law by AMLO on March 9, has a very simple requirement: that the national grid acquire its energy first from public sources and then, as necessary, from private ones. The law will also establish a fee structure for customers that can increase no faster than inflation, and, crucially, eliminates the obligation for the Federal Electricity Commission (CFE) to purchase from “auctions” of energy — in practice, a massive giveaway to private suppliers that locked in their profits at taxpayer expense.
The CFE has calculated that, taking into account subsidies, inflation, exchange-rate fluctuations, irregular supply, and rate increases, the opening of the energy market to private suppliers has cost the nation some $412 billion pesos (US$20 billion). Of this, $56 billion pesos are to have gone to one project alone, the La Venta wind farm in the state of Oaxaca, operated by another Spanish energy conglomerate, Iberdrola.
La Venta is one of some thirty-odd wind projects in the Isthmus of Tehuantepec, all but a handful owned by foreign multinationals, which have become notorious for predatory contracts, unpaid taxes, a failure to properly consult with local populations, and miserly profit-sharing agreements of one percent minus costs, a quarter of what is paid abroad. And instead of benefiting the impoverished Huave, Mixe, Zapotec, and Chontal indigenous groups that live clustered around the parks, the subsidized energy goes to feed corporate clients such as FEMSA, Mitsubishi, Gamesa, and the Bimbo Group, which can then boast of their commitment to renewable energy in glossy brochures and at shareholder meetings.
None of this, of course, has stopped the usual suspects from doing everything in their power to twist this reality into a pretzel. In a series of deeply concerned articles in the international press, AMLO’s defense of energy sovereignty has been morphed into the thesis that AMLO loves dirty energy. Because the president is replacing the bounty of (private) solar and wind with outdated (public) energy, the reasoning goes, he is a relic of the past, a doomed dinosaur lolling in a bath of oil.
“Nothing can shake AMLO’s fossil-fuel fixation,” bawls the Economist. The Financial Times warns darkly of “Mexico’s dangerous addiction to fossil fuels.” Writing in the Guardian, David Agen makes the incredible assertion that Mexico was previously a climate leader (because it handed in its plan for the Paris Agreement early) before dabbling in some amateur psychoanalysis to suggest that AMLO’s “outlook on fossil fuels and state-run companies stems from his upbringing in the oil-rich state of Tabasco.” Poor AMLO: with a childhood like that, he never stood a chance.
Other actors swept into action as well. Mary Ng, trade minister in the cabinet of Justin Trudeau — he of the Trans Mountain pipeline expansion — declared that Canada was “increasingly concerned about the investment climate in Mexico” in light of the energy bill. Another well-known environmental advocacy organization, the US Chamber of Commerce, warned that the “deeply troubling” bill would “open the door for the reinstatement of a monopoly in the electricity sector,” “limit access to clean energy for Mexico’s citizens,” and, foretelling a future route of opposition, “directly contravene Mexico’s commitments under the U.S.-Mexico-Canada Agreement.” Even Bill Gates has gotten in on the act, instructing Mexico to bet on education instead of oil. If only it had thought of that before.
The Hypocrisy, the Hypocrisy
Never mind the stunning hypocrisy of the industrialized world, which has been responsible for the overwhelming majority of fossil-fuel emissions over the last two hundred years, now lecturing a country like Mexico on curbing its own output. Never mind the fact that Mexico barely produces 1 percent of the world’s fossil-fuel emissions annually, while China and the United States alone account for 43 percent. Never mind the fact that renewable energy makes up a very small fraction of the total energy participation of private companies in Mexico.
Never mind the fact that coal, to give one example, makes up twice the share of energy output of the United States and nearly three times that of Germany, without this triggering corresponding lectures from billionaire philanthropists. Never mind that the energy-reform law gives priority to cleaner sources of energy. For this predictable scrum of commentators and bad-faith political actors, what is essential is that Mexico open the door to its grid to any and all, together with subsidies, guaranteed profits, and the ability to cherry-pick prime corporate clients, leaving the Federal Energy Commission to hold the bag. If not, the club of weaponized environmentalism will be ready and waiting.
Lost in the morass of self-serving argumentation, moreover, is the potential for a more sober analysis of where Mexico is headed with renewable energy. This would include areas where the nation is making advances: as Energy Secretary Rocío Nahle points out, Mexico already has the installed capacity to produce 31 percent of its energy through public renewable sources, were they allowed to be put fully into use. It would also entail legitimate criticism of the ecological impacts of current policies such as increased oil production, the construction of the Dos Bocas refinery in Tabasco, and the Trans-Isthmus corridor development project. None of this, however, should come as any surprise: if politics is war, the geopolitics of energy has become the main theater of battle. And as the Electric Industry Act heads to the courts, the fight is only beginning.