Power Play: Navigating Mexico’s Energy Market Amid USMCA Revisions

By Juan Carlos Machorro, Partner of Santamarina + Steta

This report provides a comprehensive analysis of the evolution of Mexico's energy regulatory framework considering the trade commitments under the United States-Mexico-Canada Agreement (USMCA, known in Mexico as T-MEC).

Background In 2013, Mexico enacted a landmark constitutional energy reform that opened the hydrocarbons and electricity sectors to private and foreign investment for the first time in decades. [1] Foreign investors established and operated wind and solar parks, combined-cycle facilities, reinforced interconnection contracts bringing electricity from the United States to Mexico, and imported U.S.-origin fuels for sale at Mexican gas stations. [2]

A shift in the Energy Public Policy in Mexico Since the election of President Andrés Manuel López Obrador in 2018, Mexico pursued an energy policy centered on favoring the state-owned Federal Electricity Commission (CFE) and Petróleos Mexicanos (PEMEX). [3]

USMCA Consultations On July 20, 2022, U.S. Trade Representative Katherine Tai announced that the United States had requested dispute settlement consultations with Mexico under the USMCA. [4] Canada joined these consultations on July 21, 2022. [5] The consultations related to measures by Mexico that undermined American and Canadian companies and U.S.-produced energy in favor of CFE and PEMEX. [6] The U.S. consultation request identified four measures that appeared to breach the USMCA: [7] [8]

1. Mexico's power industry law forced the National Center for Energy Control (CENACE) to give dispatch priority to CFE over other market actors, violating the commitment to equal treatment of all participants in the market. [9]
2. CFE and the Ministry of Energy engaged in numerous inactions, delays, denials, and revocations of private companies' permits to operate in Mexico, contrary to the commitment to guarantee equal treatment. [10]
3. The requirement for PEMEX to provide ultra-low-sulfur diesel was postponed, a privilege not granted to other companies, thereby creating an unfair competitive advantage. [11]
4. Mexico exercised regulatory discretion through the National Center for Control of Natural Gas (CENAGAS) and the Energy Regulatory Commission (CRE) to give priority in natural gas transportation services to companies that purchased directly from CFE or PEMEX, discriminating against companies with alternative suppliers. [12]

The consultations alleged violations of several USMCA chapters. U.S. officials stated that Mexico's actions appeared to violate the USMCA's prohibitions on policies that discriminate against other parties and the requirements to curtail the use of state-owned enterprises for anti-competitive purposes. [13] Specifically, the claims involved Chapter 14 (Investment), particularly the national treatment standard; Chapter 22 (State-Owned Enterprises), which requires SOEs to act in accordance with commercial considerations and provide nondiscriminatory treatment; and Chapter 2 (National Treatment and Market Access). [14] [15] The parties were given 75 days to resolve the issues, but after this period elapsed, no settlement was reached. The exhaustion of the consultation period triggered the state-to-state dispute resolution mechanism under Chapter 31 of the USMCA. According to some estimates, the dispute could cost Mexico up to USD 30 billion in retaliatory tariffs.

As of his date, the energy disputes remained active and unresolved, with the cases still pending in panels without a final resolution. [16] [17] [18]

President Sheinbaum: a Reinvigorated Reform On October 1st, 2024, President Claudia Sheinbaum, a member and the presidential candidate of the same political party of former President Lopez Obrador, took office and, as soon as October 31, 2024, she enacted a constitutional reform amending Articles 25, 27, and 28 of the Mexican Constitution. [19]

The reform recognized the concept of State prevalence (prevalencia del Estado) in the energy sector and transformed CFE and PEMEX from "productive state enterprises" (empresas productivas del Estado) into "State public enterprises" (empresas públicas del Estado). [20] [21] A subsequent constitutional reform published on December 20, 2024, transferred control of the energy sector from two independent regulators to the executive branch. [22]

On March 18, 2025, President Sheinbaum enacted a comprehensive secondary legislation package implementing the constitutional reform. [23] The package included eight new laws and amendments to three existing laws: [24]

• Hydrocarbons Sector Law (Ley del Sector Hidrocarburos, LSH)

• PEMEX Law (Ley de la Empresa Pública del Estado, Petróleos Mexicanos)

• CFE Law (Ley de la Empresa Pública del Estado, Comisión Federal de Electricidad)

• Electricity Sector Law (Ley del Sector Eléctrico, LESE)

• National Energy Commission Law (Ley de la Comisión Nacional de Energía, LCNE)

• Energy Planning and Transition Law (Ley de Planeación y Transición Energética)

• Biofuels Law (Ley de Biocombustibles)

• Geothermal Law (Ley de Geotermia) [25]

These laws abrogated the energy laws that had been in place since the 2014 reform. [26] Additionally, implementing regulations (reglamentos) were published in October 2025 for the hydrocarbons sector and in December 2025 for the electricity sector. [27] [28]

The independent energy regulators (the National Hydrocarbons Commission (CNH) and the Energy Regulatory Commission (CRE)) were abolished and replaced by a centralized National Energy Commission (CNE) reporting directly to the executive branch through the Ministry of Energy (SENER). [29] Unlike the former CRE and CNH, the CNE's Director General is freely appointed and removed by the President. [30] The CNE's governing body is chaired by SENER, which holds a tie-breaking vote. [31]

The new Hydrocarbons Sector Law establishes the following upstream participation schemes: [32] [33] Assignments for Own Development (Asignaciones para desarrollo propio): Exclusive assignments for PEMEX for exploration and extraction activities, where PEMEX acts as operator. [34] PEMEX may hire private companies through service contracts, with compensation exclusively in cash. [35] These assignments may migrate to the mixed development scheme if PEMEX requires it and SENER authorizes. [36]

Assignments for Mixed Development and Mixed Contracts (Asignaciones para desarrollo mixto y contratos mixtos): Under this model, PEMEX may complement its technical, operational, financial, and execution capabilities with private companies called "Participants". [37] PEMEX retains title over the assignment and determines the selection method for Participants. [38] The parties execute mixed contracts (contratos mixtos) that regulate the participation interest, risks, rights, and obligations. [39] PEMEX must maintain at least 40% participation interest. [40] In principle, PEMEX does not make economic contributions; however, exceptionally and with board authorization, PEMEX may contribute. [41] Revenue is distributed in order of priority: (1) applicable taxes, (2) cost recovery (capped at 30% of revenue, or 40% with SENER approval), and (3) the remainder distributed according to each party's participation. [42]

Contracts for Exploration and Extraction (Contratos para exploración y extracción de hidrocarburos, CEEs): Exceptionally, SENER may tender exploration and extraction contracts to be signed with private parties and/or PEMEX. [43] These may take the form of service contracts, shared-utility contracts, production-sharing contracts, or licenses. [44] SENER has authority to determine PEMEX's participation in such contracts. [45] However, unlike the 2014 framework where these contracts were the standard mechanism for private participation awarded through regular competitive bidding rounds, the 2025 LSH characterizes CEEs as an exceptional mechanism, with mixed contracts being the primary vehicle. [1] Additionally, while the LSH permits alternative dispute resolution mechanisms in CEEs, they may not be used for matters related to administrative rescission, a significant limitation given the 2024 judicial reform.

The new Electricity Sector Law (LESE) establishes the following framework: [48] [49] State Prevalence in Generation: The State must maintain at least 54% of the average energy injected into the national grid in any calendar year. [50] Transmission, distribution, and planning and control of the National Electric System remain exclusive to the State. [51] [52]

Six Pathways for Private Sector Participation in Electricity Generation: [53] [54] Onsite distributed generation up to 0.7 MW, it is exempt from permit requirements. [55] Self-generation systems between 0.7–20 MW, not connected to the national grid. [56] Self-generation systems between 0.7–20 MW with grid connection, where surplus power must be sold exclusively to CFE. [57] Open competition for projects larger than 0.7 MW participating in the wholesale electricity market (Mercado Eléctrico Mayorista, MEM). This is the only modality that can be developed by the State, by private parties, or through mixed development schemes. [58] [59] Utility-scale projects developed privately, with electricity sold exclusively to CFE and possible asset transfer at the end of the contract. [60] Joint ventures with CFE (mixed investment), in which CFE holds a minimum 54% ownership stake. [61]

Mixed Development Schemes in the Electricity Sector: [62]

• Long-Term Production (Producción de Largo Plazo): A mixed scheme for generation project development where the State does not contribute capital; all energy production is exclusively for CFE, which represents it in the wholesale market; and asset transfer to CFE at the end of the contract is optional and at no cost to CFE. [63] [64]

• Mixed Investment (Inversión Mixta): A scheme for generation project development where CFE must hold a direct or indirect participation of at least 54%, and may preferentially acquire the energy and associated products, with the ability to commercialize in the wholesale market. [65]

Permits, authorizations, contracts, and other instruments granted under the abrogated laws (the 2014 Electricity Industry Law and the Hydrocarbons Law) continue in effect until the end of their term, governed by the laws under which they were granted. [66] However, they may not be extended once their term concludes. [67] Limitations on Private Sector Participation Compared to the 2014 Energy Reform

Hydrocarbons Sector Under the 2014 reform, private companies could directly participate in exploration and extraction through multiple contract models—service contracts, shared-utility contracts, production-sharing contracts, and licenses—all awarded through competitive bidding rounds conducted by the independent CNH. [68] [69] Companies could be operators independently of PEMEX and could book reserves under license agreements. [70]

Under the 2025 framework, private sector participation in upstream activities is fundamentally restructured: [71]

• PEMEX holds a preferential and priority role, receiving assignments directly from SENER rather than through competitive bidding. [72]

• The primary vehicle for private participation is the mixed contract, which is ancillary to a PEMEX assignment and requires PEMEX to retain at least 40% participation. [40]

• The license model, which allowed private operators the greatest degree of independence and the ability to book reserves, has been effectively eliminated as a standard mechanism, surviving only under the exceptional CEE category that SENER may tender on an ad hoc basis. [73]

• Cost recovery is capped at 30–40% of revenue, creating potential limitations on the economic viability of capital-intensive exploration projects. [42]

• PEMEX selects its partners, rather than an independent body conducting open, competitive bidding rounds. [38]

Electricity Sector Under the 2014 reform, private generators could freely participate in the wholesale electricity market, generate electricity for sale to qualified users, and compete on equal footing with CFE. [74] Clean Energy Certificates (CELs) incentivized renewable energy investment. There was no mandated minimum share for CFE in the generation mix. [74]

Under the 2025 framework: [75] [76]

• CFE must hold at least 54% of average energy injected into the national grid, effectively capping private sector generation at 46% of the market. [77]

• Private generators participating in mixed investment schemes must accept CFE's minimum 54% stake. [65] [78]

• Long-term production contracts require all energy output to be sold exclusively to CFE, with optional asset transfer to CFE at no cost. [79]

• The independent regulators (CRE and CNH) have been dissolved and their functions absorbed into the executive branch through the CNE, reducing regulatory independence and impartiality. [22] [29]

• Legacy self-supply (autoabastecimiento) and cogeneration societies are encouraged to migrate to the new legal figures, and if they wish to participate as generators in the wholesale market, they must migrate all capacity. [80]

Summary of Key Restrictions

Feature 2014 | Energy Reform | 2024–2025 Reform

Upstream access | Open bidding rounds by independent CNH [81] | PEMEX receives assignments directly; mixed contracts or exceptional CEEs [82]

Operator independence | Private operators could operate independently [74] | Private "Participants" operate under PEMEX's assignment framework [37]

License model | Available; allowed reserve booking [74] | Effectively eliminated as standard; only exceptional CEEs [43]

Cost recovery cap | Negotiated in contract terms [74] | 30% (or 40% with SENER authorization) [83]

CFE market share mandate | No mandated minimum [74] [84] | 54% of average energy injected into grid [77]

Regulatory independence | CRE and CNH as independent bodies [85] | Functions absorbed by CNE under executive control [22] [86]

Private electricity generation | Open participation; competitive market [74] | Six defined pathways; mixed schemes require CFE 54% stake [53]

Self-supply societies | Allowed and recognized [87] | Encouraged to migrate; cannot partially migrate [88]

Potential Inconsistencies with the USMCA The 2024–2025 energy reforms raise several potential inconsistencies with Mexico's obligations under the USMCA, across multiple chapters of the agreement.

Chapter 14 — Investment and the "Ratchet Clause"

Chapter 14 of the USMCA includes what is commonly referred to as the "ratchet clause," which provides that if a country further opens its economy by allowing more trade or foreign investment, it cannot subsequently reverse those measures or close sectors previously opened to private participation. [89] Since Mexico's 2013 energy reform liberalized both the hydrocarbons and electricity sectors, introducing new restrictions on private companies in the energy sector could generate a conflict with this provision. [90]

Additionally, Article 32.11 of the USMCA contains a most-favored-nation provision that some commentators characterize as having "ratchet-like" effects. [91] Mexico incorporated its 2013 energy reforms into its CPTPP annexes, and any rollback of investor protections could trigger obligations under both treaties, regardless of what Mexican domestic law now provides. [92] This has been described as a "lock-in" mechanism for the 2013 reforms' investment protections. [93] For investors holding covered government contracts in the oil and gas sector, Annex 14-E of the USMCA provides broad protections, including fair and equitable treatment and protection against indirect expropriation, with direct access to international arbitration (ISDS) without the requirement to exhaust domestic remedies. [94]

Chapter 22 — State-Owned Enterprises

Chapter 22 requires that SOEs act in accordance with commercial considerations and provide nondiscriminatory treatment to firms from other USMCA countries. [95] The reforms that establish CFE's mandated 54% market share in electricity generation and PEMEX's priority access to hydrocarbon assignments raise questions about compliance with these nondiscrimination obligations. [96] [97] The requirement that administrative bodies regulating SOEs be impartial may conflict with the elimination of independent regulators and their replacement by the CNE, which is operationally dependent on the Ministry of Energy. [98] [99]

Chapter 2 — National Treatment and Market Access

The USMCA's national treatment provisions prohibit measures that discriminate against foreign investors in favor of domestic or state-owned entities. [100] The mandatory CFE market share, PEMEX's preferential access to assignments, and the requirement that private parties partner with state entities under prescribed minimum participation thresholds may be considered discriminatory treatment inconsistent with this chapter. [96] [97] [100]

Chapter 28 — Good Regulatory Practices

The USMCA calls for the establishment of regulatory practices that promote transparency and stakeholder participation. [101] The dissolution of independent regulators and the centralization of regulatory functions in the executive branch could be seen as inconsistent with the agreement's good regulatory practice commitments. [101]

Chapter 18 — Telecommunications (by analogy)

While primarily concerning telecommunications, Chapter 18 establishes the obligation to maintain an independent and autonomous regulatory body separate from the executive branch. [102] The elimination of independent energy regulators follows a pattern that could conflict with the spirit and intent of institutional autonomy provisions across the USMCA. [103]

Chapter 24 — Environment

Mexico's energy policies that prioritize fossil fuels over renewable energy have been identified as potentially inconsistent with USMCA environmental commitments and Mexico's Paris Agreement pledges. [104]

Dispute Resolution Concerns The September 2024 judicial reform, which replaced merit-based appointments for federal judges with popular elections, has raised concerns about judicial independence. [105] This reform, combined with modifications to the amparo remedy, affects the ability of investors to obtain effective judicial review of regulatory actions. [106] [107] However, investors with covered government contracts in the oil and gas sector retain access to ISDS protections under USMCA Annex 14-E, providing a meaningful safeguard. [108]

Sheinbaum Administration's Calls for Private Sector Participation and Market Response National Strategy and Overall Targets President Sheinbaum's administration launched the Plan for Strengthening and Expansion of the National Electric System (2025–2030), with a total estimated investment of approximately 624,618 million pesos. [109] On April 9, 2025, the government announced that 29 GW of additional capacity would be incorporated, with CFE contributing firm energy and reliability, while the private sector would support the energy transition. The plan as a whole represents an investment of nearly 740 billion pesos and the incorporation of 32 GW of additional generation capacity. [110] The target is to increase clean energy generation from 24% to 38% by 2030. [111] [112]

Electricity Sector Convocations First Convocation for Priority Generation Permits (October 2025): The Ministry of Energy published this convocation for private projects aligned with binding planning. It resulted in 51 firm initiatives totaling 5,336 MW of generation and 1,158 MW of storage, mobilizing investments exceeding 145 billion pesos. [113] The permits have already been granted and construction is expected to begin in 2026. [114]

Second Convocation for Mixed Development Projects with CFE (February 2026): CFE and SENER announced a convocation for mixed investment schemes to develop renewable energy capacity. [115] The convocation targets approximately 7,500 MW of capacity before 2030. [116] The mixed investment schemes are structured through Mexican trusts (fideicomisos), in which CFE holds 54% participation and private capital holds 46%. [117] In the preliminary stage, 222 initiatives were submitted representing nearly 38 GW of proposed capacity. [118] [119] After the formal registration phase, 56 projects from 40 companies advanced, with a portfolio exceeding 10 GW of generation capacity and 3 GW of storage, representing estimated investments of 270 billion pesos (approximately USD 15.73 billion). [120] Third Convocation (May 2026): New convocations for renewable generation and storage projects were published, including both fully private projects and mixed schemes with CFE, with a requirement that renewable projects incorporate battery storage equivalent to 30% of capacity with a 3-hour duration. [121] CFE projects mixed investments totaling approximately USD 8 billion to accelerate renewables. [122]

Among the most active participants in the CFE mixed investment process are international firms such as Invenergy (United States) with six proposals, Cubico (United Kingdom) with six initiatives, as well as Solarig (Spain), Atlántica Renewable Power (United Kingdom), HDF Energy (France), and Mexican companies such as Thermion Energy, Grupo Simsa, Terralia, and others. [123] The northeast region of Mexico leads with 14 proposals, followed by the peninsular zone with 11 and the western zone with 9. [124] [125]

Hydrocarbons Sector: Mixed Contracts First Mixed Contracts Bidding (2025): PEMEX put ten assignments up for bidding in its first mixed contracts process. [126] [127] The assignments included Tamaulipas-Constituciones, Siní-Caparroso, Nobilis-Maximino, Cuervito, Tupilco Terciario, Tlatitok-Sejkan, Macuil-Paki, Agua Fría, Pit-Kayab-Utsil, and Macavil. [128] On December 19, 2025, five mixed contracts were formalized: [129]

Assignment | Winning Company | PEMEX Participation | Signing Bonus (USD millions)

Siní-Caparroso | C5M | 84% [130] | 25.25 [130]

Tamaulipas-Constituciones | C5M | 80% [131] | 5.15 [132]

Cuervito | Geolis | 46% [133] | 5.71 [133]

Tupilco Terciario | CESIGSA | 64% [134] | 5.00+ [135]

Agua Fría | Petrolera Miahupan | 48% [136] | 10.72 [136]

The five contracts yielded cumulative signing bonuses of USD 49.84 million. [137] Only five of the ten offered assignments received bids, meaning the other five were not awarded. [138] [139] [140] The winning companies were predominantly Mexican firms. [141] PEMEX expects the mixed contracts to produce approximately 69,400 barrels of crude oil per day and 609.5 million cubic feet of gas in 2025. [142]

Subsequent Rounds: PEMEX is advancing the bidding of 21 mixed contracts as part of its Strategic Plan 2025–2035, with approximately 40 companies expressing interest in participating in mixed contracts for mature fields. [143] [144] PEMEX anticipates that mixed contracts will ultimately account for 25% of national production. [145]

The response from the private sector has been mixed. In the electricity sector, significant interest has been demonstrated, with over 222 initial proposals for mixed investment with CFE and 51 firm projects under the priority permits convocation. [118] [146] [147] International players have entered the process, suggesting a degree of confidence in the new framework's viability, although uncertainties remain regarding contract terms, regulatory implementation, and dispute resolution. [148]

In the hydrocarbons sector, the first round of mixed contracts attracted limited participation—only five of ten offered assignments received bids, and the winning companies were largely domestic operators rather than international oil majors. [140] As a point of reference, the first bidding round under the 2014 reform (July 2015) similarly had modest results: 34 companies were prequalified, nine appeared on bidding day, and only two blocks were ultimately awarded. [149] Key challenges identified by practitioners include the need for clearer definition of the legal nature of mixed contracts, adequate risk-allocation mechanisms, cost-recovery provisions that allow project financing, and the absence of final implementing regulations for several aspects of the new framework. [150] [151] The anticipation is that as the regulatory framework matures through implementing regulations and practical experience, both domestic and international participation may increase.

The US Response: Mexico's energy policies a significant trade concern The Office of the United States Trade Representative (USTR) has consistently identified Mexico's energy policies as a significant trade enforcement concern across multiple official reports, reflecting a sustained and escalating pattern of objections to Mexico's treatment of U.S. investors and companies in the energy sector. In its 2025 Trade Policy Agenda and 2024 Annual Report, USTR described the energy dispute under the heading "USMCA: Mexico – Measures Related to Energy." [25] The report stated that on July 20, 2022, the United States requested consultations with Mexico under the USMCA relating to measures that "undermine American companies and U.S.-produced energy in favor of Mexico's state-owned electrical utility, the Comisión Federal de Electricidad (CFE), and state-owned oil and gas company, Petróleos Mexicanos (PEMEX)." [26] USTR specifically identified four challenged measures: (1) a 2021 amendment to Mexico's Electric Power Industry Law that prioritizes CFE-produced electricity over electricity generated by all private competitors; (2) Mexico's inaction, delays, denials, and revocations of private companies' abilities to operate in Mexico's energy sector; (3) a December 2019 regulation granting only PEMEX an extension to comply with maximum sulfur content requirements; and (4) a June 2022 action that advantages PEMEX, CFE, and their products in the use of Mexico's natural gas transportation network. [27] These measures were characterized as "inconsistent with several of Mexico's USMCA obligations, including under the Market Access, Investment, and State-Owned Enterprises chapters." [28] As of December 31, 2024, the Parties continued to consult on this matter.

The 2025 National Trade Estimate (NTE) Report, USTR's flagship annual publication cataloging trade barriers, devoted a dedicated section to Mexico's energy sector under "Investment Barriers." [29] The report noted that "[s]ince December 2018, Mexico has pursued an energy policy centered on reinstating the primacy of its state-owned electric utility, Federal Electricity Commission (CFE), and state-owned oil and gas company, Mexican Petroleum (PEMEX)."

The report highlighted several specific barriers: [30]

• The March 2021 amendment to the Electric Power Industry Law requiring Mexico's national grid operator to prioritize the supply of CFE-generated electricity into the grid over electricity generated by private power companies, "regardless of cost or environmental impact."

• Frequent delays, unexplained or unjustified rejections, and inaction regarding applications for new permits or permit modifications.

• Unexplained or unjustified suspensions or revocations of existing permits undermining private companies' ability to operate renewable energy facilities, import or export electricity or fuel, store or transload fuel, and build or operate retail fuel stations.

• The December 2019 regulation granting PEMEX an extension to 2026 to comply with ultra-low sulfur diesel requirements.

• A June 2022 policy requiring users of Mexico's gas transportation network to source natural gas from either PEMEX or CFE.

Significantly, the report noted that "[m]ultiple U.S. companies have reported exiting Mexico's energy market as a direct consequence of these measures." [31]

The 2025 NTE also identified the October 2024 constitutional amendment reclassifying CFE and PEMEX as "public enterprises" as an effort "to undermine the participation of private companies, including U.S. companies, in Mexico's energy market." It further noted the January 2025 reform package that guarantees CFE's prevalence with at least 54% of average energy sent to the grid, requires CFE ownership of at least 54% in any "mixed investment" projects, and sets out a preference for CFE over private individuals in electricity generation and marketing. [32]

USTR's 2025 Trade Enforcement Priorities Report, published in July 2025, listed Mexico's energy measures as an active enforcement priority under "Dispute Settlement Related to Other USMCA Commitments." The report reiterated the four challenged measures and concluded that they "appear to be inconsistent with several of Mexico's USMCA obligations, including under the Market Access, Investment, and State-Owned Enterprises Chapters." [33]

The report stated that "[t]he United States is continuing to engage with Mexico to address the concerns set out in the U.S. consultations request, and remains in close conversation with U.S. companies about this matter." It further emphasized that "[i]t remains the goal of the United States to seek a solution with Mexico that addresses Mexico's discriminatory practices, such as in the energy sector." [34]

Notably, the Executive Summary of the report characterized enforcement under the USMCA as including the goal to address Mexico's "discriminatory practices in the energy sector," placing it alongside labor enforcement, environmental monitoring, and agricultural market access as a top-tier enforcement priority. [35]

In the most recent 2026 Trade Policy Agenda and 2025 Annual Report, published in February 2026, USTR significantly escalated its characterization of Mexico's energy policies. [36] The report explicitly stated that "Mexico has adopted a series of preferential measures to benefit national champions in its energy and mining sectors, particularly concerning oil, gas, and electricity, to the detriment of U.S. investors" and that "Mexico has undermined its overall investment climate." The report identified Mexico's energy policies as one of the critical issues to be addressed in the USMCA Joint Review scheduled for July 1, 2026, warning that "USTR will negotiate firmly to resolve issues identified through the Joint Review, and will recommend renewal only if such resolution can be achieved." This language represents a significant escalation, linking the energy dispute to the question of whether the USMCA itself will be renewed. [37]

The 2026 National Trade Estimate Report on Foreign Trade Barriers (NTE Report), published in March 2026, provided the most comprehensive and updated assessment of Mexico's energy barriers. [38] Under "Investment Barriers – Energy Sector," USTR stated that "Mexican energy policy is centered on reinstating the primacy of its state-owned electric utility, Federal Electricity Commission (CFE), and state-owned oil and gas company, Mexican Petroleum (PEMEX)."

The 2026 report incorporated new concerns arising from the 2024–2025 reforms: • The October 2024 constitutional amendment reclassifying CFE and PEMEX as "public enterprises" to "limit the participation of private companies in Mexico's energy market."

• The March 2025 reform package guaranteeing CFE's prevalence with at least 54% of average electricity sent to the grid.

• The requirement for CFE ownership of at least 54% in any "mixed investment" electricity generation projects. [39]

• The preference for CFE over private entities in electricity generation and marketing.

The report also identified new barriers that emerged from the implementing regulations: • The October 2025 hydrocarbons regulations that prohibit certain fuel transloading activities, "which decreases logistical flexibility and increases operating costs for U.S. companies, unfairly favoring PEMEX."

• New restrictions for fuel permits, including a reduction in the term for new import permits from 20 years to five years.

• A reduction in the term for commercialization permits from 30 years to 2 years. [40]

• The fact that "[t]hese regulatory changes do not apply to PEMEX."

Additionally, USTR raised concerns about: • Draft regulations previewed in December 2025 that would restrict independent power producers' ability to sell their output and grant CFE the option to acquire assets at no cost.

• The disbanding of Mexico's energy regulatory agency and establishment of the CNE under SENER supervision, "further centralizing decision-making authority under SENER."

• An "unprecedented challenge" with U.S. companies receiving payment from PEMEX, with overdue payments totaling over USD 2.5 billion as of December 31, 2025. [41]

Across all reports, USTR has consistently identified the following USMCA chapters as potentially violated by Mexico's energy measures: • Chapter 2 (National Treatment and Market Access for Goods): Cited in connection with discriminatory dispatch priority and permit practices.

• Chapter 14 (Investment): Cited regarding the failure to provide national treatment to U.S. investors in the energy sector.

• Chapter 22 (State-Owned Enterprises and Designated Monopolies): Cited regarding the preferential treatment of CFE and PEMEX and the use of these entities to disadvantage private competitors.

Conclusions

Mexico's energy regulatory landscape has undergone a fundamental transformation since 2018, culminating in the 2024 constitutional reform and the 2025 secondary legislation package. [28] This transformation represents a deliberate reversal of the 2013–2014 energy liberalization, moving from an open-market model with independent regulatory oversight to a state-led model where PEMEX and CFE enjoy constitutional prevalence and private sector participation is channeled through defined, limited mechanisms.

The tension between Mexico's sovereign right to regulate its energy sector—expressly recognized in Chapter 8 of the USMCA—and its trade and investment commitments under the same agreement defines the central legal and policy challenge. [28] While Mexico retains ownership of hydrocarbons in its subsoil, the USMCA imposes enforceable obligations regarding the treatment of foreign investors, the behavior of state-owned enterprises, and the maintenance of open, competitive markets in sectors previously liberalized.

The USMCA Joint Review scheduled for July 1, 2026, will be the decisive moment for this dispute. USTR has explicitly conditioned the recommendation for renewal of the agreement on the resolution of identified issues, including energy. The outcome will shape the future of North American energy integration, foreign investment in Mexico's energy sector, and the credibility of trade agreement enforcement mechanisms.

Endnotes

5. Hogan Lovells, "Los Estados Unidos y Canadá solicitan consultas en el marco del T-MEC por las políticas energéticas de México que favorecen a CFE y PEMEX," JD Supra, August 1, 2022. Available at: https://www.jdsupra.com/legalnews/los-estados-unidos-y-canada-solicitan-2579627/
6. Id.
7. Id.
8. Office of the United States Trade Representative (USTR), "United States Requests Consultations Under the USMCA Over Mexico's Energy Policies," Press Release, July 20, 2022. Available at: https://ustr.gov/about-us/policy-offices/press-office/press-releases/2022/july/united-states-requests-consultations-under-usmca-over-mexicos-energy-policies-0
9. Hogan Lovells, supra note 1.
10. USTR, supra note 4.
11. Baker Institute for Public Policy, Rice University, Miriam Grunstein & Tony Payan, "What's up with the USMCA and Mexico's Energy Policy?," September 14, 2022. Available at: https://www.bakerinstitute.org/research/whats-usmca-and-mexicos-energy-policy
12. Associated Press, "US demands talks on Mexican energy policies it calls unfair," July 20, 2022.
13. Baker Institute, supra note 7.
14. Id.
15. Id.
16. Id.
17. USTR, supra note 4; New York Times, "The Biden administration will challenge Mexico's state control of its energy industry," July 20, 2022.
18. Kluwer Arbitration Blog, Guillermo Garcia Sanchez, "Mexico's New Energy Sovereignty Puts the USMCA Dispute Resolution Mechanisms to a Test," November 25, 2022. Available at: https://legalblogs.wolterskluwer.com/arbitration-blog/mexicos-new-energy-sovereignty-puts-the-usmca-dispute-resolution-mechanisms-to-a-test/
19. Congressional Research Service (CRS), M. Angeles Villarreal, "The United States-Mexico-Canada Agreement (USMCA)," Report R44981, May 29, 2024. Available at: https://www.congress.gov/crs-product/R44981
20. Kluwer Arbitration Blog, supra note 14.
21. Id. (estimating the dispute could cost Mexico USD 30 billion in retaliatory tariffs, citing Reuters).
22. Petróleo & Energía, "Disputas en el T-MEC Relacionadas con la Política Energética de México," September 29, 2025. Available at: https://petroleoenergia.com/industrias/disputas-en-el-t-mec-relacionadas-con-la-politica-energetica-de-mexico/
23. Ritch Mueller, "Alerta para Clientes - Iniciativa de Reformas a Diversas Leyes en Materia Energética," February 2025. Available at: https://www.ritch.com.mx/prensa/alerta-para-clientes-iniciativa-de-reformas-a-diversas-leyes-en-materia-energetica
24. Id.; DWF Group, "Energy Reform in Mexico," February 18, 2025. Available at: https://dwfgroup.com/en/news-and-insights/insights/2025/2/energy-reform-in-mexico
25. DWF Group, supra note 20.
26. Mayer Brown, "Mexico Energy Reform," 2025. Available at: https://www.mayerbrown.com/en/services/mexico-energy-reform
27. U.S. International Trade Administration, Department of Commerce, "Mexico Energy Sector Reform," April 10, 2025. Available at: https://www.trade.gov/market-intelligence/mexico-energy-sector-reform
28. Id.; LexLatin, Ingrid Rojas, "Con la reforma energética de Sheinbaum, ¿cuáles son las opciones de participación del sector privado?," June 29, 2025. Available at: https://lexlatin.com/reportajes/reforma-energetica-sheinbaum-participacion-sector-privado
29. LexLatin, supra note 24.
30. Mayer Brown, supra note 22.
31. Norton Rose Fulbright, "Reforma energética: La nueva regulación para el sector de hidrocarburos en México," April 2025. Available at: https://www.nortonrosefulbright.com/es-419/knowledge/publications/ccce965e/energy-reform-the-new-regulation-for-the-hydrocarbons-sector-in-mexico
32. Norton Rose Fulbright, "Reformas secundarias al sector de hidrocarburos," October 15, 2025; Proyectos México (Gobierno de México), "Electricidad," listing DOF publications for December 2025 regulations. Available at: https://www.proyectosmexico.gob.mx/como-invertir-en-infraestructura-en-mexico/ciclo-inversion/ciclos-electricidad/
33. U.S. International Trade Administration, supra note 23; Mayer Brown, supra note 22.
34. Jones Day, "Reforma Constitucional en el Sector Eléctrico Mexicano," May 12, 2025. Available at: https://www.jonesday.com/es/insights/2025/05/constitutional-reform-in-mexican-electricity-sector
35. Id.
36. Norton Rose Fulbright, supra note 27.
37. Id.
38. Id.
39. Id.
40. Id.
41. Id.
42. Id.
43. Id.
44. Id.; Norton Rose Fulbright, supra note 27 (stating PEMEX must maintain at least 40% participation interest).
45. Id.
46. Id. (revenue distribution: taxes, cost recovery capped at 30%–40%, remainder per participation).
47. Id.
48. Id. (CEEs may be service, shared-utility, production-sharing, or license contracts).
49. Id.
50. Ley de Ingresos Sobre Hidrocarburos (LISH), Articles 10–12; Senado de la República, "Cuaderno de Investigación: Régimen Fiscal del Sector Hidrocarburos." Available at: http://bibliodigitalibd.senado.gob.mx/bitstream/handle/123456789/2194/CI_5.pdf
51. Id. The four contract types were: (1) production-sharing contracts; (2) shared-utility contracts; (3) license contracts; and (4) service contracts.
52. LISH, Article 10 (license contracts: compensation through onerous transfer of hydrocarbons, including signing bonus, exploratory fee, royalties, and contractual rate).
53. EITI Mexico, "Hidrocarburos - Contraprestaciones de contratos de licencia." Available at: https://eiti.transparenciapresupuestaria.gob.mx/swb/eiti/hidrocarburos
54. JD Supra, "Mexico's Energy Reform Provides Significant [Opportunities]," 2014 (noting license contracts allow financial and accounting recording of discoveries). Available at: https://www.jdsupra.com/post/fileServer.aspx?fName=3e306a3d-040d-4fda-9a6b-cb260cb99b07.pdf
55. EITI Mexico, supra note 49 (production-sharing contracts: contractor compensation in kind as physical hydrocarbons).
56. Id. (cost recovery permitted under production-sharing and shared-utility contracts).
57. Comisión Nacional de Hidrocarburos (CNH), "Libro Blanco: Primera Licitación de la Ronda 1, CNH-R01-L01/2014," describing the first round for 14 shallow-water blocks under production-sharing contracts. Available at: https://rondasmexico.energia.gob.mx/media/1559/214-informe-final.pdf
58. Columbia University, Center on Global Energy Policy, Adrian Lajous, "Mexican Energy Reform" (noting signing bonuses apply only to license contracts, not production-sharing contracts). Available at: http://www.energypolicy.columbia.edu/sites/default/files/energy/CGEP_Adrian%20Lajous_Mexican%20Energy%20Reform_Final.pdf
59. Ernst & Young (EY), Javier F. Noguez Estrada, "Contratos de Exploración y Producción: Licitaciones y Funcionamiento" (comparing fiscal terms of license, shared-utility, and production-sharing contracts). Available at: https://www.pued.unam.mx/export/sites/default/archivos/actividades/Mesas/020516/JNE.pdf
60. Id. (shared-utility contracts used in Rounds 1.3 and 1.4 for onshore blocks; contractor receives cash compensation).
61. Senado de la República, supra note 46.
62. EY, supra note 55 (fiscal stability clause: fiscal terms of the contract could not be changed during the life of the contract).
63. Norton Rose Fulbright, supra note 27 (CEE mechanism under the 2025 LSH preserves the four contract types but as an "exceptional" mechanism).
64. Id. (SENER has authority to determine PEMEX's participation in any CEE).
65. Id. (alternative dispute resolution prohibited for administrative rescission matters under CEEs).
66. Id. (independent CNH dissolved; functions transferred to SENER and CNE).
67. Energía Hoy, Fluvio Ruiz, "La primera tanda de contratos mixtos," December 2025. Available at: https://energiahoy.com/energy-knowledge/la-primera-tanda-de-contratos-mixtos/
68. U.S. International Trade Administration, supra note 23 (six pathways for private sector participation in electricity generation).
69. Jones Day, supra note 30.
70. Id. (long-term production and mixed investment schemes in the electricity sector).
71. Id. (legacy instruments continue in effect but may not be extended).
72. DWF Group, supra note 20; Chambers and Partners, "Mexico: An Energy & Natural Resources: Oil & Gas Overview," 2025. Available at: https://chambers.com/content/item/7375
73. Chambers and Partners, supra note 68.
74. Id.
75. Norton Rose Fulbright, supra note 27.
76. IMCO (Instituto Mexicano para la Competitividad), "A cuatro años del T-MEC," July 1, 2024 (analyzing ratchet clause under Chapter 14). Available at: https://imco.org.mx/a-cuatro-anos-del-t-mec/
77. Id.
78. Chambers and Partners, supra note 68 (Annex 14-E protections for covered government contracts in oil and gas, including ISDS access without domestic exhaustion requirement).
79. CRS, supra note 15 (Chapter 22 SOE obligations).
80. Baker Institute, Mendoza Cota, "Implications of Mexico's Energy Reform on the United States-Mexico [relationship]," March 2025. Available at: https://www.bakerinstitute.org/sites/default/files/2025-03/20250325-Mendoza%20Cota-Implications%20of%20Mexico%27s%20Energy%20Reform-Research%20Paper_0.pdf
81. Id.
82. IMCO, supra note 72 (Chapter 22 impartiality requirements for SOE regulators).
83. Id. (Chapter 18 telecommunications regulatory independence obligations).
84. Petróleo & Energía, supra note 18 (Chapter 24 environmental concerns; Brookings Institution, "Developing a roadmap for USMCA success," 2021).
85. Chambers and Partners, supra note 68 (2024 judicial reform and impact on dispute resolution).
86. Proyectos México (Gobierno de México), supra note 28.
87. Secretaría de Energía (SENER), "SENER presenta instrumentos para detonar inversión en generación eléctrica por casi 740 mil mdp rumbo a 2030," May 2026. Available at: https://www.gob.mx/sener/articulos/sener-presenta-instrumentos-para-detonar-inversion-en-generacion-electrica-por-casi-740-mil-mdp-rumbo-a-2030
88. Id.
89. Energía Estratégica, Matías Medinilla, "Del boom inicial al filtro final: 40 empresas siguen en carrera por los proyectos mixtos de CFE en México," May 14, 2026. Available at: https://www.energiaestrategica.com/es/notes/del-boom-inicial-al-filtro-final-40-empresas-siguen-en-carrera-por-los-proyectos-mixtos-de-cfe-en-mexico
90. Id.
91. Mijares, Angoitia, Cortés y Fuentes, S.C., "CFE y SENER presentan la Convocatoria para Esquemas de Desarrollo Mixto CFE," February 10, 2026. Available at: https://www.mijares.mx/noticias/cfe-y-sener-presentan-la-convocatoria-para-esquemas-de-desarrollo-mixto-cfe
92. Energía Estratégica, supra note 85.
93. CMIC (Cámara Mexicana de la Industria de la Construcción), reporting on SENER announcements of new renewable and storage convocations, May 2026. Available at: https://www.cmic.org.mx/sectores/energetica/noticmic.cfm?seleccion=165
94. BStrategic PR, "CFE proyecta inversiones mixtas por US$8.000 millones para acelerar renovables," May 2026. Available at: https://bstrategicpr.com/es/radar/cfe-proyecta-inversiones-mixtas-por-us8000-millones-para-acelerar-renovables
95. Energía Estratégica, supra note 85.
96. Id.
97. Energía Hoy, supra note 63.
98. Energy21, Adrián Arias, "Estos son los ganadores de los contratos mixtos de PEMEX," December 17, 2025. Available at: https://energy21.com.mx/estos-son-los-ganadores-de-los-contratos-mixtos-de-pemex/
99. Id.
100. Id.
101. CMIC, supra note 89 (PEMEX expects mixed contracts to produce 69,400 barrels of crude per day).
102. Energy & Commerce, "Pemex delinea la arquitectura general de los contratos mixtos," August 13, 2025. Available at: https://energyandcommerce.com.mx/pemex-delinea-la-arquitectura-general-de-los-contratos-mixtos/
103. Energy Magazine, "Pemex despierta interés de 40 empresas por contratos mixtos en campos maduros," October 2025. Available at: https://energymagazine.mx/2025/10/pemex-despierta-interes-de-40-empresas-por-contratos-mixtos-en-campos-maduros/
104. Petroquimex, "Pemex prevé que los contratos mixtos logren 25% de la producción." Available at: https://petroquimex.com/pemex-preve-que-los-contratos-mixtos-logren-25-de-la-produccion/
105. LexLatin, supra note 24 (challenges identified by practitioners regarding mixed contract terms and regulatory implementation).
106. USTR, "2025 Trade Policy Agenda and 2024 Annual Report," February 28, 2025. Available at: https://ustr.gov/sites/default/files/files/reports/2025/2025%20Trade%20Policy%20Agenda%20WTO%20at%2030%20and%202024%20Annual%20Report%2002282025%20--%20FINAL.pdf
107. Id.
108. Id.
109. USTR, "2025 National Trade Estimate Report on Foreign Trade Barriers," March 1, 2025. Available at: https://ustr.gov/sites/default/files/files/Press/Reports/2025NTE.pdf
110. Id.
111. Id. ("[m]ultiple U.S. companies have reported exiting Mexico's energy market as a direct consequence of these measures").
112. Id.
113. USTR, "2025 Trade Enforcement Priorities Report," July 2025. Available at: https://ustr.gov/sites/default/files/files/reports/2025/USTR%202025%20Trade%20Enforcement%20Priorities%20Report%20FINAL.pdf
114. Id. ("[i]t remains the goal of the United States to seek a solution with Mexico that addresses Mexico's discriminatory practices, such as in the energy sector").
115. Id. (Executive Summary listing energy as top-tier enforcement priority).
116. USTR, "2026 Trade Policy Agenda and 2025 Annual Report," February 16, 2026. Available at: https://ustr.gov/sites/default/files/files/Press/Releases/2026/2026%20Trade%20Policy%20Agenda%202025%20Annual%20Report.pdf
117. Id. ("USTR will negotiate firmly to resolve issues identified through the Joint Review, and will recommend renewal only if such resolution can be achieved").
118. USTR, "2026 National Trade Estimate Report on Foreign Trade Barriers," March 4, 2026. Available at: https://ustr.gov/sites/default/files/files/Press/Releases/2026/National%20Trade%20Estimate%20Report%202026.pdf
119. Id. (new barriers from October 2025 hydrocarbons regulations, permit term reductions, and PEMEX payment arrears of USD 2.5 billion).
120. Id.
121. Id.
122. Universidad de Navarra, Global Affairs, Andrea Marsch, "México, EEUU y Canadá afrontan la revisión del T-MEC," February 9, 2026. Available at: https://www.unav.edu/web/global-affairs/mexico-eeuu-y-canada-afrontan-la-revision-del-t-mec
123. Baker Institute, supra note 76.
124. Greenberg Traurig, "Mexican Constitutional Amendment Reforms Electric Energy and Other Strategic Sectors," November 19, 2024. Available at: https://www.gtlaw-environmentalandenergy.com/2024/11/articles/mexico-2/mexican-constitutional-amendment-reforms-electric-energy-and-other-strategic-sectors/
125. Foley & Lardner LLP, "Mexican Government Proposes Bill to Regulate the Energy Sector," March 18, 2025. Available at: https://www.foley.com/insights/publications/2025/03/mexican-government-proposes-bill-regulate-energy-sector/
126. Integralia Consultores, "Reporte Especial - Nuevo régimen energético," April 7, 2025. Available at: https://integralia.com.mx/web/wp-content/uploads/2025/04/Reporte-Especial_Analisis-de-las-reformas-en-materia-de-energia_07ABR25.pdf
127. IMCO, "Mercado eléctrico en México: nuevas reglas y camino regulatorio pendiente," October 14, 2025. Available at: https://imco.org.mx/mercado-electrico-en-mexico-nuevas-reglas-y-camino-regulatorio-pendiente/
128. U.S. Energy Information Administration (EIA), "Mexico's energy reform seeks to reverse decline in oil production," May 27, 2014. Available at: https://www.eia.gov/todayinenergy/detail.php?id=16431
129. IMF, Phil De Imus, "Chapter 4: Mexico's Energy Reform: Effects on Energy Production and Macroeconomic Impact," in Power Play, November 23, 2015. Available at: https://www.elibrary.imf.org/display/book/9781498364799/ch004.xml
130. PEMEX, "Se fortalece Pemex con las leyes secundarias de la Reforma Constitucional en materia energética," February 5, 2025. Available at: https://www.pemex.com/saladeprensa/boletines_nacionales/Paginas/2025_05-nacional.aspx
131. NetworkIDEAs, "¿Libre comercio o soberanía energética? El dilema del T-MEC y la nueva geopolítica de la energía," March 9, 2026. Available at: https://www.networkideas.org/2026/03/09/libre-comercio-o-soberania-energetica/
132. Gobierno de México, "Resultados de las Mesas de Consulta Pública para la Revisión del T-MEC," March 2026. Available at: https://www.gob.mx/cms/uploads/attachment/file/1063973/20260309_InformeConsultasT-MEC.pdf

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