ENERGY SECURITYAMLO’s Lithium Grab and War on Green Energy Will Hurt North America

By Shannon K. O’Neil

Published 14 May 2022

Nationalizing Mexico’s lithium reserves and extending state control over electricity and energy will undermine the region’s prosperity and security.

By reasserting state control over Mexico’s natural resources, President Andres Manuel Lopez Obrador is once again slowing the nation’s economic recovery and its potential for longer-term growth. As sad and predictable as his actions may be, however, their damage will extend beyond Mexico’s borders, affecting the North American continent’s ability to shorten and strengthen its supply chains, address the damaging effects of climate change and regulate migration. More broadly, they will retard the process of integration on which the region’s future depends.

Since 2013 Mexico’s constitution has allowed private investment in energy. Money has flooded in. Deepwater and onshore oil fields have brought in billions of dollars from global companies including Shell Plc, Chevron Corp., Exxon Mobil Corp., and BP Plc. Private domestic and international capital has gone into pipelines, gas storage facilities and retail outlets. Exxon and BP stations now dot busy commercial corners, eroding state-controlled Pemex’s monopoly over gas pumps. Private investment has transformed electricity production as well. As available wattage has soared, rolling blackouts no longer pepper Mexico’s industrial heartland. Overall prices have fallen, too, as the auction process favored lower-cost generators. The influx of private funds kicked off Mexico’s green energy transition, building out much of the nation’s wind and solar capacity.  

Since taking office, Lopez Obrador, known as AMLO, has systematically undermined these changes. He suspended auctions for new oil fields. His administration has refused or revoked permits for private sector energy projects, and abruptly canceled contracts for others. Regulatory changes have made it prohibitively expensive for independent electricity generators to sell to the national grid. And his government has taken to arbitrarily shutting down operations, for instance closing privately owned gas importing and storage terminals that compete with Pemex, on specious permitting grounds.

He used his party’s majority in Congress to pass the Electricity Industry Law in 2021, setting off a continuing legal and political tussle. Since the law contravenes current constitutional provisions by prioritizing state-generated power over often cheaper, more efficient, and cleaner private production, hundreds of mostly successful lawsuits have ensued.

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