Mexico’s president-elect balks at including energy in revised Nafta

MEXICO CITY—A split has emerged among Mexico’s incoming and outgoing administrations over how to handle the subject of energy in ongoing talks to revamp the North American Free Trade Agreement, possibly complicating attempts to reach a deal.

The incoming government of president-elect Andrés Manuel López Obrador wants to prevent a new chapter on energy investment from being included in the pact, something the current Mexican team and its U.S. and Canadian counterparts had already agreed upon, according to people with knowledge of the talks.

Energy wasn’t included in the original 1994 trade deal because Mexico at the time had a state monopoly in oilCLV8, +1.25%  and its constitution forbade any private investment in the sector. But in 2013, the government of President Enrique Peña Nieto overhauled the charter to open the industry to private and foreign investment. López Obrador was against the changes.

Since then, dozens of foreign oil companies, including major U.S. ones, have won the rights to drill for oil and gas in Mexico, pledging billions of dollars in investment. The incoming administration has said it doesn’t plan to roll back the changes, but it remains unclear if it will press ahead with any new auctions.

Negotiators from the U.S. and Mexico are meeting this week in Washington, D.C., in a last minute dash to get a deal done before the end of this month, giving enough time for lawmakers in Mexico to give approval before López Obrador takes office in December. Trade negotiators from both countries want to sort bilateral trade issues in the treaty before Canadian negotiators rejoin talks, possibly in coming days.

An expanded version of this report appears on WSJ.com.

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