Patriotism will be exalted. Demagoguery will dominate. The essence of a high-level trade negotiation will not be manifested, publicly. Today is the time to stretch the league, confront, show teeth and make it clear that the consequences will be assumed. Cost what they cost.
The first phase of the requests for consultation presented last week by the governments of the United States and Canada, within the framework of the T-MEC, for Mexico’s energy policy, is just beginning, but in the business community the consensus is that nothing good will come of it from this.
Thus, this series will have several chapters. First, the political discourse will dominate and the calls to defend the homeland will multiply. Later, away from the spotlight, the representatives of the Mexican government will look for a way to reconcile with their US and Canadian counterparts so as not to escalate the trade dispute any further. At the same time, investments mainly in the electricity sector will remain on edge.
The action taken by the United States government around the energy market in North America has provoked endless emotions in the business community based in Mexico. On the one hand, it leaves a certain feeling of victory because it means support for the positions already known by various players in the sector who warned of the change in rules. However, there is also unease as some companies quietly accuse that the campaign of persecution against them continues.
Undoubtedly, the first reactions of President Andrés Manuel López Obrador are angry and worrying, since they leave the feeling that the Mexican government, or its most influential member, is not dimensioning the great problem in which it would put the country, but above all the implications that their decisions would have on the economy and in business.
For now, no player in the electricity sector, national or foreign, will make any public pronouncement. Foreign investment in this area does not have, at the moment, any incentive to multiply. The business representations will leave the fate of the investments in the hands of the US and Canadian authorities; also, they bet that the lawsuit ends in the coming weeks in holy peace.
The political game, under the glass of the private sector, is thought of in some way like this: if the president’s ear lets go of the positions of the director general of the CFE, Manuel Bartlett, and the secretary of Energy, Rocío Nahle, the battle is lost and the deterioration of the electricity market will intensify; but, if he masters the technique and the knowledge of the experts from the Ministry of Economy, the outcome might not be so bitter.
It is known that in the Ministry of Economy there are personnel who are aware of the difficulties in mounting the State’s defense against this case; in the private sector there is confidence in Tatiana Clouthier’s team, made up of people with experience and a lot of international contact who know what we are involved in, but it is also evident that there is a line that comes from the National Palace that can disdain the technique and give turn to ideology.
Intense weeks are coming. According to a route drawn up by the IMCO, from the controversy presented (July 20) there must be 30 days to request consultations and then 45 days to carry them out (August 19 as the deadline). Until now there is no history of a single case that has been resolved in that first instance; certainly, due to the implications of the case, a settlement should not be ruled out but, outside of Las Vegas, it is not advisable to contribute for it.
No one wants to arrive at October 3 with the spirits altered. That day is marked as the fatal date for the resolution of the case or the request for the establishment of a dispute panel. Subsequently, the appointment of the chairman of the panel and the panelists would come, and then wait for the final report by May 1, 2023. Also, it is possible that Canada will continue another process in parallel.
In times of commerce this period is thought to be short. It is borne in mind that disputes in the WTO can last five years or more. So, having a resolution of such a complex issue with so many edges in less than a year is, in the end, good news.
What is worrying, however, is that if the lawsuit ends up in a panel and is lost, the price to pay would be brutally high. Context: in past controversies, the most notorious case was that of trucking cargo from Mexico against the United States, which meant retaliation for 2,000 million dollars. In this regard, Ildefonso Guajardo, former Secretary of the Economy, maintains that if the United States wins the panel of controversies within the framework of the T-MEC, it could impose tariffs on Mexico for the amount of damage caused in the energy sector, which he estimates at more than 30,000 million dollars. .
There would be more broken plates to pay. In a panel of controversies (State to State) the effects are not only on investors in the energy sector but also on the future of investments in the manufacturing sector that require clean energy. And there can fit many sectors.
Now, with a cooler head, it is also worth looking at the phenomenon under another lens and, thus, perhaps all this leads to good news: we will finally know what is the real scope of action of the Mexican government in energy matters.
Throughout this six-year term, the discussion on energy has unfolded in a 1,000-ring circus. Now, with a dispute of this caliber, there will be no room for dogma. The resolution that comes will provide certainty. At last we will know if the Mexican government is right or wrong, and investors will know what the rules of the game are; after a long period of anxiety, the picture will become clearer for better or for worse.
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It’s not all fury. There are players from the energy sector who observe the heated situation from the stands. Not only do they consider that the so-called fourth transformation has good initiatives, but they are doing great business and are already rubbing their hands to generate more profits.
Yes, its executives find it difficult to “sell Mexico”, but they have known how to play a card: not to talk about numbers (investments) but about the resonance of their operations with a social vision. Thus the storytelling.
Editor’s note: Jonathán Torres is managing partner of BeGood, Atelier de Reputación and Storydoing; business journalist, media consultant, former editorial director of Forbes Media Latam. Follow him on and on Twitter as . The opinions published in this column belong exclusively to the author.
