In Mexico, public power and popular sovereignty must defend Indigenous peoples’ rights

Mexico’s energy sector is currently highly dependent on fossil fuels, with oil and gas constituting 85 per cent of the energy mix.1 With imported gas providing as much as 70 per cent of the country’s energy needs, Mexico’s energy market is built on foreign dependency, upholding the country’s colonial legacy. At the same time, over one-third of Mexican households suffer from energy poverty thanks to the continued prioritisation of private profits over energy access.2 Sixty years after the initial nationalisation of the electricity industry, attempts at reforming the energy sector to achieve greater independence, public control and energy sovereignty have been shut down by supporters of the private oligarchy. The struggle for public ownership and a just energy transition continues.

Over the past 90 years, Mexico’s energy sector has experienced substantial transformation. After the Mexican Revolution, the new Mexican Constitution (1917) stipulated that ownership of natural resources such as land and water would be granted to the Mexican State, making way for comprehensive nationalisations throughout the 1930s.3 Under the leadership of the social democratic PRI (Partido Revolucionario Institucional), the energy sector was first reorganised in the 1930s. In 1937, the federal electricity commission (CFE), a state-owned and state-financed enterprise, were created. CFE’s main tasks were the generation and distribution of electricity to Mexican households.

In 1960, the electricity industry was nationalised, giving the government exclusive responsibility for electricity generation, transmission, and distribution. The nationalisation effectively created a monopoly on electricity for CFE and ended a decade-long dispute over foreign-owned electric power firms that controlled nearly 70 per cent of the market.4 By 1992, CFE achieved an electrification rate of over 93 per cent.5 As of 2020, according to official documents, access to electricity in Mexico was as high as 99.1 per cent -- although this figure is challenged by civil society organisations.6

With the growing popularity of neoliberalism and large-scale privatisations in many countries, Mexican politicians began to adopt a similar mentality in the 1990s.7 Between 1990 and 1992, essential sectors were privatised, such as the telecommunications sector, with the sale of Telmex for US$6 billion in 1990. In 1992, a law was passed allowing the participation of private corporations in energy generation. The law remained heavily debated for a decade and in 2002, the Mexican Supreme Court eventually ruled that it may have been unconstitutional, though no clear-cut ruling was presented. Further attempts at unbundling the energy sector were made in the late 1990s and early 2000s, with the goal of rebranding energy as a commercial rather than a public service and allowing independent power producers to sell directly to industrial customers and CFE under long-term contracts. However, both attempts failed and, as required by the constitution, the electricity sector remained federally owned, with CFE in control. 

In 2013, President Peña Nieto made another attempt at privatisation, this time amending the constitution to promote private sector participation in the energy market. Between 2013 and 2014, Peña Nieto’s administration made 20 legislative changes and three constitutional amendments that opened the Mexican energy market to private companies, both national and foreign.8 In effect, this pushed Mexican energy policies back to pre-nationalisation days, making it possible for private companies to extract and handle resources on behalf of the State, to generate energy and sell it to CFE, and to own and invest in renewable energy projects.

Since then, CFE has been hollowed out, its functions reduced to that of an administrative entity, with private corporations now owning and controlling energy generation.9 An independent operator, the National Center for Energy Control (CENACE), was introduced to coordinate a marketised energy sector, where private companies and CFE compete to generate and sell power.10 As a consequence of the reforms, electricity prices increased by 35 per cent between 2015 and 2017.11 CFE and PEMEX (the Mexican state-owned petroleum company founded in 1938), which were considered strategic entities with a social orientation prior to the liberalisation of the energy sector, have been turned into for-profit state-owned entities.

Elected in 2018 on the promise of decreasing Mexico’s dependency on foreign imports and improving social and economic well-being, President Andrés Manuel López Obrador (known by his initials AMLO) of left-wing party Morena took on the task of reversing the country’s energy privatisation. In September 2021, AMLO introduced a plan to annul the 2013 energy reforms, undoing energy liberalisation and increasing energy sovereignty.12 Proposed reforms included the cancellation of contracts with private energy generators and increasing the share of energy generation contracts reserved for CFE from 38 per cent to 54 per cent. However, in April 2022, he could not win the two-thirds congressional majority required to approve the reforms, as private interest groups lobbied against the plan. Of the 334 votes necessary to amend the constitution, only 275 were obtained.

Just days after this vote, President AMLO secured a partial win in nationalising the country’s lithium industry, one part of the reform package. The amendment to the National Mining Law was given fast-track treatment and approved by both chambers of the Mexican Congress in late April 2022. The Lithium Mining Reform declares lithium resources as a public utility, limiting exploration and exploitation rights to the Mexican state. A new decentralised public body, a state-owned company called LitioMx (Litio para Mexico), was created in August 2022 to oversee this.13 However, public ownership of lithium resources will only benefit Mexico’s people if the government uses its power to resist excessive export-oriented extraction and to promote a just transition led by and for the Indigenous and Mexican populations.

AMLO’s proposed energy reform has received harsh criticism from governments across the Global North, in particular the US, who claim that preferential treatment for state-owned enterprises would violate Mexico’s free trade agreements.14 Additionally, energy multinationals claim that the nationalisation of energy will raise energy costs. Strong criticism also comes from environmentalist groups, who assert that the Morena government is favouring fossil-fuel-based electricity and aims to shut down privately developed renewable energy projects, such as solar farms and wind parks. This is a vast simplification of the reality.15

In January 2022, 76.4 per cent of electricity generation was based on fossil fuels, causing Mexico to import large quantities of oil and gas.16 While the country exports crude oil, domestic production and refining are limited, so Mexico is a net importer of refined petroleum products. In its current state, Mexico can either choose to reduce domestic production and refining further, which would require increased imports to meet energy demand as the current structure of the energy sector ultimately depends on fossil fuels. Alternatively, the country can produce and refine more oil domestically, decreasing international dependencies. By re-nationalising the energy sector, these processes would take place under public control rather than for a profit motive. This gives the State the capacity to move forward with an economy-wide electrification of transport, heating, and cooling systems – a decade-long process that is necessary to transition to renewable energies and leave behind fossil fuels.17 In this light, in April AMLO announced a $6bn purchase of the bulk of Spanish private firm Iberdrola’s Mexican generating assets, including 12 combined cycle generation power plants and one wind farm. AMLO described this move as a ‘new nationalisation’, which will increase CFE’s market share from 40% to 55.5%.18

AMLO’s proposal is better understood as an urgent tool for a pro-public energy transition rather than an attack on renewable energy. Indeed, Mexico’s privately owned renewables sector currently contributes to an oversupply to the national grid. As a result of the privatisation policies of Peña Nieto, the Mexican Regulatory Commission CRE has granted private energy generators permits to increase energy supply to 84 GWh.19 However, the national network holding capacity lies at 47 GWh, and national demand for energy has never exceeded that volume, giving no reason to almost double energy supply. If electricity generation and transport were both in public hands and integrated, an increase in renewable production could be planned in conjunction with expanding the grid and reducing fossil fuel power.

For decades, Indigenous groups have highlighted the problems of privatised renewable energy projects in Mexico. Among the most well-known and contested projects are the wind farms in the Isthmus of Tehuantepec, a natural wind corridor between the Gulf of Mexico and the Pacific Ocean. 28 wind farms have been set up on the isthmus, which together generate 62 per cent of Mexico’s wind energy.20 The largest, the Oaxaca wind farm, opened in May 2019 with 132 new turbines. This added renewable energy capacity comes at a cost, threatening the livelihoods of several Indigenous groups who live in the area.21 As established in international law, Indigenous peoples have a right to consultation prior to the establishment of projects on their land. However, Indigenous communities affected by the Oaxaca project report that they were not consulted and were not given the chance to voice their concerns before construction began. With the wind farm now up and running, land used for traditional agricultural practices is being polluted, and wildlife driven away.

Indigenous populations have organised themselves to stop the construction of these exploitative wind projects, for example by blocking access to the area or taking matters to the Supreme Court. When the Zapotec community sued private energy multinational Energía Eólica del Sur due to the lack of prior consultation, the Supreme Court initially ruled in favour of the Indigenous group but ended up reversing the temporary suspension of the project.22 Indigenous peoples standing up to private investors have repeatedly reported harassment, threats of violence, and persecution by private corporations and local police.

In an attempt to provide an alternative to privately-owned wind parks, the Ixtepec community of Oaxaca developed its own community-owned wind farm.23 In collaboration with Yansa Group, an overseas foundation, the community designed the project through a participatory and democratic process, involving several community meetings and inclusive decision-making. A proposal was submitted to the government. However, the government refused to grant permission for the project, stating that government requirements were not fully met. Instead, private company Enel Green Power was granted permission for the construction of a wind farm. The unwillingness of the government to support Indigenous communities’ renewable energy projects undermines the democratic legitimacy of the Mexican State.

A democratically organised and publicly owned energy sector, alongside popular sovereignty over lithium and other transition-related resources, is crucial to enable Mexico to move towards renewable energies. However, reclaiming public control must go hand in hand with a clear commitment to a timely and just energy transition. As of today, transparent action is still lacking from the Morena government. While the AMLO administration repeatedly assures the public that a return to state ownership will offer social and environmental benefits and enable the government to reach its climate targets, the population is still waiting for these promises to be fulfilled. At the same time, despite severe opposition, AMLO has been taking steps towards producing public renewables.

At the state level, Mexico’s first large-scale public renewable energy projects were initiated in recent years, most notably the $1.68 billion solar plant in Puerto Peñasco, which stretches over 2,000 hectares. The solar plant, set to be the biggest in Latin America, symbolises an important step towards publicly owned renewable energy generation. Additionally, it sets a precedent for large-scale public-public partnerships as a partnership between CFE and the Sonoran State Government underpins the project. The project was authorised in July 2021 and construction is expected to be finalised by 2027. The joint venture will be co-owned by CFE (54 per cent) and the Sonoran State Government (46 per cent) and will be financed entirely through debt.25 The debt financing will be initiated through export credit agencies, most of which will be issued in the form of a 14-year, below-market-interest-rate loan from Sweden’s export credit agency, EKN. The plant will have a generation capacity of 420 megawatts, sufficient to meet the energy needs of northwestern Mexico, and will be essential to avoid energy rationing according to CFE. However to promote rather than undermine the interests of Indigenous and other frontline communities, the public venture must go beyond mere community consultation. It must practice Free, Prior and Informed Consent so that affected populations can co-design the entire process, from planning and design to construction and management.26

To move beyond a centralised model of public ownership and further embrace the democratisation of the energy sector throughout the country, trade unions and some environmental activists point to the need for more comprehensive constitutional reforms.27 Reforms pertaining to the rights of Indigenous Peoples and Afro-Mexicans are necessary to recognise Indigenous communities as ‘sujetos de derecho público’ (bearers of public rights). This, in turn, would constitutionalise autonomous forms of government, communal landholding and the right of Indigenous peoples to co-govern the natural resources and mineral wealth of their lands. The recognition of these diverse forms of governance are necessary to move beyond the neoliberal and exploitative structure of Mexico’s energy market and achieve a just energy transition for all its inhabitants.