Resolved: The United Mexican States should substantially increase private sector participation in its energy industry.

Key Terms

  • United Mexican States: The official name of Mexico, a federal republic in North America.
  • Private sector participation: Involvement of privately-owned businesses in an industry, as opposed to state-owned enterprises.
  • Energy industry: The sector involved in production and supply of energy, including oil, gas, electricity, and renewables.


Mexico’s energy industry has historically been dominated by state-owned companies, particularly Petróleos Mexicanos (Pemex) for oil and gas and the Federal Electricity Commission (CFE) for electricity. In 2013, Mexico passed major energy reforms to open up the sector to private and foreign investment. However, since 2018, the administration of President Andrés Manuel López Obrador has sought to reverse many of these reforms and strengthen state control over the energy industry.

The debate over private sector participation in Mexico’s energy industry remains highly contentious due to the López Obrador administration’s efforts to reassert state control over the sector, reversing previous reforms that had opened it up to private investment.

This policy shift is being pursued for several reasons:

Energy sovereignty: President López Obrador has emphasized “energy sovereignty” as a key priority, aiming to reduce reliance on foreign companies and imports.
Strengthening state-owned enterprises: The administration seeks to bolster the positions of state-owned oil company Pemex and the Federal Electricity Commission (CFE), viewing them as strategic national assets.
Ideological stance: López Obrador’s policy aligns with his broader political philosophy of reducing private sector influence in key industries.

Specific steps taken by the administration include:

Canceling oil auctions: The government suspended oil and gas auctions that had allowed private companies to bid for exploration and production rights.
Electricity market reforms: A controversial reform to the Electric Industry Law prioritized power from state-owned plants over private renewable energy projects.

These actions have led to significant consequences:

Legal challenges: Both domestic and international companies have filed lawsuits against these policy changes, arguing they violate existing contracts and trade agreements.
International disputes: The United States and Canada have initiated consultations under the USMCA trade agreement, alleging unfair treatment of their energy companies.
Investment impact: The policy uncertainty has discouraged private investment in Mexico’s energy sector, potentially limiting its growth and modernization.

Meanwhile, Mexico faces significant challenges in its energy sector:

Growing demand: Increasing energy consumption, partly driven by economic growth and nearshoring trends, is straining the existing infrastructure.
Infrastructure modernization: Mexico’s power grid and energy infrastructure require substantial upgrades to improve reliability and accommodate new energy sources.
Clean energy transition: The country is struggling to meet its clean energy targets, with fossil fuels still dominating electricity generation.

These challenges highlight the tension between the government’s desire for state control and the need for investment and expertise to modernize and expand Mexico’s energy sector. The outcome of this debate will have significant implications for Mexico’s energy security, economic competitiveness, and environmental goals in the coming years.

The Pro

Strengthening the energy infrastructure.  Mexico’s energy infrastructure, particularly in the electricity sector, is aging and in need of significant upgrades. The Atlantic Council notes that Mexico’s transmission and distribution network requires substantial investment to improve reliability and accommodate new energy sources. Private investment could provide the capital needed for these crucial upgrades, which the state-owned Federal Electricity Commission (CFE) may struggle to finance alone.

With growing energy demand, Mexico needs to expand its production capacity. The Wilson Center analysis highlights that Mexico faces “increasing energy demand due to pent-up demand and nearshoring, coupled with insufficient investment in energy infrastructure.” Private sector participation could help bridge this gap by financing and developing new power generation projects, including renewable energy sources.

The trend of nearshoring, where companies move production closer to end markets, is creating additional pressure on Mexico’s energy infrastructure. S&P Global reports that nearshoring could lead to significant increases in electricity demand, potentially outpacing current growth projections. Private investment could help Mexico rapidly scale up its energy capacity to meet this growing demand and capitalize on economic opportunities.

Private sector participation often brings with it technological innovations that can improve efficiency and sustainability in the energy sector. The OECD principles for private sector participation in infrastructure emphasize how private involvement can bring “creativity, efficiency and capital to address complex transportation problems.” This principle applies equally to the energy sector, where private companies could introduce advanced technologies in areas such as smart grids, renewable energy, and energy storage.

Private companies, driven by market forces, often bring operational efficiencies to infrastructure projects. Infrastructure Investor reports that private sector involvement can lead to more efficient project development and management, potentially reducing costs and improving service quality in the energy sector.

Opening the energy sector to private participation could attract significant foreign investment. Mexico Business News suggests that facilitating private investment in the energy sector could help Mexico attract billions of dollars in foreign capital, crucial for large-scale infrastructure projects.

While state-owned enterprises like CFE play a crucial role, private investment can complement and augment state resources. Reuters reports that private sector participation could help alleviate the financial burden on state-owned companies, allowing them to focus on strategic areas while private entities contribute to overall sector growth.

Clean energy.  Mexico is currently struggling to meet its clean energy targets, with fossil fuels still dominating electricity generation. The country has set an ambitious goal of generating 35% of its electricity from clean energy sources by 2024, as mandated by its Energy Transition Law. However, according to the International Trade Administration, in 2022, only 31.2% of Mexico’s power generation came from clean energy sources. Increased private sector participation could accelerate the deployment of renewable energy projects, helping Mexico bridge this gap and meet its targets.

Private companies often bring cutting-edge technologies and expertise to the energy sector. As noted by the OECD principles for private sector participation in infrastructure, private involvement can bring “creativity, efficiency and capital to address complex problems.” In the context of Mexico’s energy sector, this could mean introducing advanced renewable energy technologies, smart grid solutions, and energy storage systems that are crucial for a clean energy transition.

The transition to clean energy requires substantial capital investment. A report by the National Renewable Energy Laboratory (NREL) highlights that Mexico has enormous renewable energy potential, including 24,918 GW of solar photovoltaics and 3,669 GW of wind power. However, harnessing this potential requires significant investment in infrastructure and technology. Private sector participation could bring in the necessary capital, reducing the financial burden on the state and accelerating the development of renewable energy projects.

Private companies, driven by market forces, often bring operational efficiencies to the energy sector. This can lead to reduced costs in energy production and distribution. According to Latin Lawyer, renewable energy technologies are becoming increasingly cost-effective. Increased private sector participation could help drive down the cost of clean energy, making it more competitive with fossil fuels and accelerating the transition.

There are many reasons for Mexico to focus on clean energy.

Economic benefits: Transitioning to clean energy can create jobs, attract investments, and reduce electricity costs.

According to the National Renewable Energy Laboratory, achieving Mexico’s 35% clean energy target by 2024 could result in:

$1.1 billion in electricity production cost savings
$17 billion in direct investment
Creation of over 72,000 full-time jobs

Mexico currently relies heavily on fossil fuel imports, particularly natural gas from the United States. Developing domestic renewable resources would increase Mexico’s energy independence and reduce vulnerability to price fluctuations and supply disruptions. As noted by the U.S. International Trade Administration, Mexico has enormous potential for solar, wind, and geothermal energy that could help diversify its energy supply.

Meeting climate goals: As the world’s 14th largest emitter of greenhouse gases, Mexico needs to transition to clean energy to meet its climate commitments. The country has pledged to reduce emissions by 35% by 2030 under the Paris Agreement, but is currently not on track to meet this goal. Expanding renewables is crucial for Mexico to achieve its climate targets and contribute to global efforts to combat climate change.

Abundant renewable resources: Mexico has significant untapped potential for clean energy. The Enerdata report highlights that Mexico could develop 24,918 GW of solar photovoltaics, 3,669 GW of wind power, and 2.5 GW of geothermal energy – more than enough to meet the country’s electricity needs many times over.

Rural electrification: Clean energy, particularly solar, provides a cost-effective way to bring electricity to remote rural communities that are not connected to the main grid. This can improve quality of life and economic opportunities in underserved areas.
Air quality and health: Transitioning away from fossil fuels, especially in urban areas, would significantly improve air quality and public health outcomes. Mexico City and other major urban centers struggle with air pollution, much of which comes from the energy and transport sectors.

Regional competitiveness: As noted by the Wilson Center, Mexico faces increasing energy demand due to economic growth and nearshoring of manufacturing. Developing clean energy is crucial for Mexico to meet this growing demand sustainably and remain competitive in the global economy.

Technological innovation: Investing in clean energy can drive innovation in Mexico’s energy sector, positioning the country as a leader in emerging technologies like energy storage and green hydrogen.

The Con

Con arguments center around three concerns.

Energy soverignty. President López Obrador has made “energy sovereignty” a cornerstone of his administration’s policy, emphasizing the importance of maintaining state control over Mexico’s energy resources. This stance is rooted in several concerns:
a) Strategic importance: Energy resources, particularly oil and gas, are viewed as critical national assets that should be managed for the benefit of all Mexicans rather than private interests. The Wilson Center notes that AMLO sees energy as “a matter of national security and sovereignty.”
b) Economic independence: There are fears that increased foreign involvement could lead to external influence over Mexico’s economic policies. Brookings Institution research highlights how energy policy is intertwined with notions of national autonomy in Mexico.
c) Resource nationalism: The idea that a nation’s natural resources belong to its people is deeply ingrained in Mexican political culture. A study in Energy Research & Social Science explores how this concept shapes energy policy debates in Mexico.

Profit prioritization over public interest. Critics argue that private companies, driven by profit motives, may not align with broader public interests

a) Price concerns: There are fears that privatization could lead to higher energy prices for consumers. The Transnational Institute article points to “escalating crises rooted in the for-profit energy system” in other countries that have privatized their energy sectors.
b) Underserved areas: Private companies may focus on profitable urban markets, potentially neglecting rural or low-income areas. A Power Magazine article discusses how state control historically allowed for expansion of electricity access to rural areas in Mexico.
c) Environmental concerns: There are worries that profit-driven companies may prioritize short-term gains over long-term environmental sustainability. Energy Transition examines Mexico’s challenges in balancing energy development with environmental goals.

Historical and cultural significance of state-owned enterprises. Pemex and CFE hold a special place in Mexican national identity.

a) Symbol of sovereignty: The 1938 nationalization of the oil industry, which led to the creation of Pemex, is seen as a defining moment in Mexican history. The Wikipedia entry on Mexico highlights this event’s significance.
b) National pride: State-owned enterprises are often viewed as sources of national pride and accomplishment. An IFRI analysis explores the cultural importance of these companies in Mexico.
c) Social role: Historically, Pemex and CFE have played important social roles beyond their economic functions, such as providing employment and supporting community development. A Harvard Electricity Policy Group paper discusses the complex social and political roles of these state-owned enterprises.