Andrés Manuel López Obrador reckons that the country should produce its own energy, rather than importing it. But it is unclear that Mexico has the capacity to produce enough electricity
Save time by listening to our audio articles as you multitaskThe government has already spent billions of dollars building a new refinery and has decided to keep coal-fired power stations running. It has also bolstered the state-owned electricity and oil companies by giving them priority over private firms.
The conflict in Ukraine has prompted a global shift towards energy self-sufficiency. But it is unclear that Mexico has the capacity to produce enough electricity. Power is also likely to become more expensive. Operating costs at, the state electricity provider, are significantly higher than at private providers. Its old and inefficient plants are expensive to maintain.
The impact of the policy may be felt in the economy more broadly. Energy reforms helped bring manufacturers to Mexico by making power cheaper and more reliable. Now the uncertainty is deterring investors. The policies have been challenged in the domestic courts. They are causing a regional ruckus, too. The United States and Canada have brought an action alleging that the policies have disadvantaged their companies, in breach of the tripartitefree-trade deal.
The opportunity cost is huge. Experts reckon that Mexico could produce almost half its electricity from renewable sources long before its target of 2050. Companies serving the American market are looking at Mexico as an alternative location to China, after the supply-chain problems that arose during the pandemic. But thanks to Mexico’s backward-looking energy policy, in 2023 those companies are likely to go elsewhere instead.