Nearly 200 wind farms, natural gas plants, solar panels and other projects are stalled, according to government documents, after López Obrador ordered a halt to permits, exacerbating what was already a lengthy bureaucratic process.
Renewable energy giant Iberdrola SA postponed new investments in Mexico, while AES Corp. postponed an agreement to build a $400 million wind farm due to permitting issues, according to three people familiar with the matter.
In the oil and gas sector—an industry already suffering from oversupply, weak prices, and an accelerated transition away from fossil fuels—auctions for deep-water drilling licenses have been suspended since AMLO, as the president is known, took office in late 2018.
Meanwhile, one of Mexico's biggest private oil discoveries is on hold amid protracted ownership talks between the driller and state-owned Pemex.
One of the main factors influencing policy changes in Mexico is AMLO's energy nationalism, which seeks to prioritize the country's state-owned companies at the expense of private operators.
The president has repeatedly said he is considering changing the Constitution to reverse the opening of the country to foreign investors, a historic measure adopted in 2014 under the previous administration that ended more than 75 years of state monopoly in the energy sector.
"AMLO's clear objective is to change the rules of the game so that the State once again dominates and can dictate the terms under which private money enters the system," said Duncan Wood , director of the Mexico Institute at the Wilson Center.
"Everything points to the fact that he wants to shut down the system again. A major blow." Cancellations and stalled investments are putting pressure on Mexicans who were counting on the jobs and growth that these projects would generate at a time when the economy is facing its biggest contraction in almost a century.
When the state-owned electric utility refused to supply gas to the $1.2 billion power plant that Iberdrola planned to build in Tuxpan, the eastern Mexican port city suffered a "major blow," said Mayor Juan Antonio Aguilar Mancha.
According to Aguilar Mancha, of the conservative opposition party PAN, this was an important investment that was going to generate more than 2,000 jobs, giving new life to the region and the city.
Two years after taking office, AMLO's anti-business strategy for the energy industry contrasts with his conservative approach to much of the government's economic policy, from cutting the budget to supporting a new free trade agreement with the United States and Canada.
After promising to revive the state-owned oil company Petróleos Mexicanos and the electricity company Comisión Federal de Electricidad, or CFE, López Obrador is adopting increasingly strict policies for private companies, particularly foreign groups.
Measures implemented to curb competition include regulatory changes and delays in issuing permits.
The president has also publicly attacked Iberdrola and the oil exploration company Repsol SA, calling them virtual monopolies. Stalled Projects The backlog of stalled projects has increased dramatically since López Obrador took office.
Six months before taking office, there were fewer than 30 overdue projects that exceeded the legal deadline.
By mid-October, the figure reached about 200, and nearly half of them had been requested in 2019, months before Covid-19 appeared.
Since October, regulators have approved some projects, but have not disclosed how many.
As a result, Mexico's energy investment climate is deteriorating rapidly.
During AMLO's first year in office, foreign direct investment in all types of energy projects plummeted by more than 60% to US$2.25 billion, according to figures from the Ministry of Economy, while in the first three quarters of 2020, it fell to US$1.3 billion.
Investors are now very hesitant to commit money to Mexico due to concerns about the rule of law and a lack of regulatory independence, said two executives who declined to be identified for fear of government retaliation.
The president's office and AES declined to comment.
The Energy Regulatory Commission said the delays in issuing permits were due to the suspension of legal deadlines and terms imposed as a result of the pandemic. The fate of Zama: The French energy company Electricité de France SA, or EDF, has waited nearly a year to obtain a social impact permit to build a 300-megawatt wind farm.
But the Energy Secretariat office that issues these permits is closed due to the pandemic and will not reopen until next year.
Meanwhile, Cubico Sustainable Investments, owned by two of Canada's largest pension funds, canceled a couple of renewable energy projects after regulatory issues, according to people familiar with the situation.
EDF said it scrupulously follows Mexican and international procedures for consultation with local communities, associations and local authorities.
The social impact permit has been delayed because Covid-19 hampered efforts to obtain public opinion, the company said.
As for Cubico, a spokesperson declined to comment.