The Mexico section of the International Chamber of Commerce (ICC Mexico) said Wednesday that it anticipates a wave of lawsuits, legal appeals and international panels of investor disputes after Mexico enacted a law that gives an advantage to the government generation of electricity over private power plants.

Several foreign companies built many wind, solar and gas power plants in Mexico, but President Andrés Manuel López Obrador plans to give priority to state-owned coal, fuel oil and diesel plants.

ICC Mexico said on Wednesday that several clauses of the new law violate the Mexican Constitution itself, which guarantees the right to competition and a healthy environment, and that they appear to violate trade and investment protection agreements.

ICC Mexico president Claus Von Wobeser said that companies affected by the law will begin in the coming weeks to request injunctions and file appeals against the new law, enacted on Tuesday.

“There is a wave of unconstitutional actions,” said Von Wobeser. “All affected companies will contest.”

The new law says electricity must first be purchased from government-owned plants, which are mostly powered by fossil fuels. If demand remains, he adds, electricity can be purchased from private renewable energy and natural gas plants.

The move has already caused complaints from private business groups and US investors. Analysts warn that it could violate the new free trade agreement with the United States and Canada, the T-MEC, which sets strict limits on how a government can favor its firms to the detriment of outside firms.

López Obrador wants to defend state firms and argues that Mexico should be self-sufficient in the energy sector, a conviction that he says was strengthened after winter storms in Texas temporarily disrupted the supply of natural gas imported by Mexico this year.

In February, the US Chamber of Commerce said the law would “directly contravene Mexican commitments” under the T-MEC.

The Vice President of the Chamber for the Americas, Neil Herrington, said in a statement that the law could reinstate a government monopoly, adding that “those changes would significantly raise the cost of electricity and limit access to clean energy for Mexican citizens.” .

“Unfortunately, this step is the latest in a pattern of worrying decisions taken by the Mexican government that have undermined the confidence of foreign investors in the country,” Herrington wrote.

Private and renewable energy plants were encouraged by López Obrador’s predecessors in order to reduce carbon emissions.

With the reduced use of electricity during the pandemic, the Mexican state electricity company, the Federal Electricity Commission, faces a fall in income and an increase in the reserves of the fuel oil it uses in generating plants.

That fuel has lost customers around the world. The company has also come under pressure to buy coal from Mexican mines.

Categorized in:

Tagged in:

,