And if Biden wins… ‘adjustments’ are foreseen in energy and labor topics in Mexico

Note published in El Financiero, in the Economía [Economy] section by the Editorial Department.
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Analysts consider that the Democrat’s ‘green’ policy will imply adjustments in the national energy sector and Mexico would be under pressure to fulfill its renewable energy commitments.

In face of an imminent triumph by Democratic candidate Joe Biden for the presidency of the United States, analysts stated that Mexico will have to adapt to a new economic reality, which means that adjustments to the labor and energy policies contrary to those implemented by Donald Trump in the last four years will have to be made.

Mario Jorge Yañez, partner at the Hogan Lovells Firm, explained that, on the topic of energy matters and clean energy, the positions of President Andrés Manuel López Obrador are contrary to those of the Democratic candidate.

“Biden says that he will promote clean energy, which will be a severe blow to the US economy, since economic activity related to the exploitation of fossil fuels will decrease and there will be a decrease in the creation of jobs; this affects us seriously because President Obrador is betting on fossil and coal energies; it is an issue that will hit us from the side of the treaties”, said the expert.

Thus, the virtual arrival of Biden to the White House would eliminate the obstacles that prevent the energy sector from growing and aligning itself with the ecological and sustainable use policies, specialists agreed.

“If we believe that Mexico moves like a mirror (of the United States), the electrification of the economy and the use of cleaner sources, which are already much cheaper, and the regional integration around these terms undoubtedly implies important benefits for the Mexican economy which currently has a frankly stagnant energy sector”, said Pablo Zárate, Managing Director of FTI Consulting.

Lourdes Melgar, an energy sector analyst, pointed out that the arrival of Biden will mean the return of the US to the Paris Agreement and the promotion of the energy transition.

“That will undoubtedly have an emphasis in terms of the conversation with Mexico because Joe Biden will seek the fulfillment of the commitments that different countries have within the Paris agreement and in favor of renewable energies. We are straying far from compliance with our commitments and, with Biden, a call will be made to Mexico to comply with the agreement”, she said.

In the opinion of Rafael de la Fuente, head economist for UBS, Latin America, “Biden will adopt a green agenda and will promote renewable energies over fossil fuels; the energy policy of the United States could be at odds with the direction of the policy in Mexico. In the last few months, AMLO’s administration has taken measures to protect Pemex and the CFE [Federal Energy Commission] from greater private competition, including the delay of investment projects that are underway within the renewable arena by private entities.”

The commercial relationship between Mexico and Trump fostered national exports to levels similar to those seen in 2016; however, specialists foresee a relationship that will be under more scrutiny, should Biden reach the Presidency.

Mexican Exports to the US
As percentage of the total, aggregate from January to August of each year

Source: INEGI


The USMCA will be ‘dusted off’

Alejandrina Barajas, researcher at the Northwest Economic Research Center (CIEN), pointed out that 100 days after the United States-Mexico-Canada Agreement (USMCA) came into force, the agreement has been practically kept stored in a drawer because of the pandemic.

“Biden would arrive to bring order in face of the complaints of lack of compliance on labor and environmental matters and, to be honest, it is all in the hands of Mexico; the rules are clearly established and, in the event that the Mexican government fails to comply, the United States will be completely free to demand compliance on what was agreed and practice economic retaliation”, he said.

José Carlos Rodríguez Pueblita, managing partner of the Pondera consulting Firm, pointed out that the Democrats will be stricter in the compliance of the USMCA guidelines.

“On Biden’s side migratory terms will change, there will be a diametrical change in which we will not have that concern; however, in terms of commerce, support for certain sectors would probably be maintained and they would undoubtedly be more systematic in USMCA compliance, particularly in energy matters”, stated the analyst.

Jesús Garza, professor at the EGADE Business School, believes that if Joe Biden were elected, but the Democrats lost control of the Senate, this situation will mainly have an impact on the so-called largest commercial agreement in the world.

“The first and most important implication for Mexico is the USMCA; the agreement must be complied with in either case; however, Biden has recently said that he will pay close attention to ensure that the fulfillment of the agreements reached with Mexico in regard to labor topics is complied with, that is, payment of 16 dollars per hour in some production processes, such as the automotive sector, which used to pay between 2 and 4 dollars per hour”, he said.

Rodrigo Barros, director of Economic Studies at Grupo Financiero Santander, said that economic recovery has started to lose momentum in the last trimester of 2020, which poses a complicated economic scenario for next year.

Ricardo Martínez, founding partner at the De la Vega & Martínez Rojas Firm, warned that, as a result of the USMCA, the United States “is eager” to file complaints against Mexico, a scenario that could become relevant for next year, with the Democrats strengthened by Joe Biden’s victory.

“The outlook is difficult, and companies must be very strict in our compliance with the USMCA and the legitimization of collective bargaining agreements”, said the expert.


With information provided by Jessika Becerra, Héctor Usla, Zenyazen Flores and Guillermo Castañares.