Mexico’s Development Banks Fuel the Fossil Energy Trade

Demonstrators demand clarification of the murder of land rights activist Samir Flores and the shutdown of a thermoelectric plant in the state of Morelos, in central Mexico, in a February 2019 protest on Mexico City's emblematic Paseo Reforma. CREDIT: Emilio Godoy/IPS

Demonstrators demand clarification of the murder of land rights
activist Samir Flores and the shutdown of a thermoelectric plant in
the state of Morelos, in central Mexico, in a February 2019 protest
on Mexico City’s emblematic Paseo Reforma. CREDIT: Emilio
Godoy/IPS

By Emilio Godoy
MEXICO CITY, May 20 2020 (IPS)

Since 2012, Teresa Castellanos has fought the construction of a
gas-fired power plant in Huexca, in the central Mexican state of
Morelos, adjacent to the country’s capital.

“We don’t want the power plant to operate, because it will
cause irreparable damage, polluting the water and air. This project
was imposed on us; we have to defend the water and the land. This
is not an industrial zone,” the activist, coordinator of the
Huexca Resistance Committee, told IPS.

During the tests, the constant noise of the turbines also
altered the life of this small community of just over 1,000 people,
mostly farmers, near the Cuautla River, within the rural
municipality of Yecapixtla.”Development banks must have safeguards
and principles for sustainable investment. National regulations are
needed, which define climate finance and green finance, what
principles govern them, what are the climate risks. The trend
should be to increasingly finance green projects and less and less
hydrocarbons.” — Liliana Estrada

The Central Combined Cycle Plant, located in Huexca and with a
capacity of 620 megawatts based on gas and steam, is part of the
Morelos Integral Project (PIM), developed by the state Federal
Electricity Commission (CFE). It also consists of an aqueduct and a
gas pipeline that crosses the states of Morelos, Puebla and
Tlaxcala.

The People’s Front in Defence of Land and Water of Morelos,
Puebla and Tlaxcala and its ally, the Permanent Assembly of the
People of Morelos
, have managed to get several court orders
that have blocked the operation of the plant, the 12-km aqueduct
and the 171-km gas pipeline since 2015.

Castellanos, who has won an international and a national award
for her activism, has been involved in the battle against the plant
from the very start, which has earned her persecution and
threats.

The opposition to the power plant by local communities that
depend on planting corn, beans, squash and tomatoes and raising
cattle and pigs, focuses on the lack of consultation, the threat to
their agricultural activity, due to the extraction of water from
the rivers, and the discharge of liquid waste.

In February 2019, a public consultation that did not meet
international standards supported the completion of the
project.

A few days earlier, activist Samir Flores had been murdered, a
crime that remains unsolved – just one more instance of violence
against environmentalists in Mexico. Despite Flores’ murder, the
government of leftist President Andrés Manuel López Obrador went
ahead with the referendum and upheld the result.

Public funds have fuelled the conflict, as the state-owned
National Bank of Public
Works and Services
(Banobras) lent some 55 million dollars for
the pipeline.

As in the case of other projects, development banks have become
a financial pillar for the oil industry in Latin America’s
second-largest nation, population 130 million.

The National Bank of
Foreign Trade
(Bancomext), Banobras and Nacional
Financiera
(Nafin) have funneled millions of dollars into
building pipelines and oil and gas facilities in recent years, even
though the climate change crisis makes it necessary to abandon such
investments.

They have also financed renewable energy projects, but in much
smaller amounts than fossil fuels.

The construction and operation of the Central Combined Cycle Plant, of the state Federal Electricity Commission, financed with public funds, unleashed a conflict with residents of Huexca, a small community in the central Mexican state of Morelos, which has brought the operation of the thermoelectric plant to a halt. CREDIT: Emilio Godoy/IPS

The construction and operation of the Central Combined Cycle
Plant, of the state Federal Electricity Commission, financed with
public funds, unleashed a conflict with residents of Huexca, a
small community in the central Mexican state of Morelos, which has
brought the operation of the thermoelectric plant to a halt.
CREDIT: Emilio Godoy/IPS

Energy reform pillar

The energy reform that then conservative president Enrique Peña
Nieto (2012-2018) enacted in 2013 opened the sector to private
capital, broke the monopoly of the state-owned Petroleos Mexicanos
(Pemex) oil giant and CFE, and made Mexico an attractive market for
international investment in the sector.

To support this transformation, the state development banks also
opened their coffers.´

Since 2012, Banobras, which finances infrastructure and public
works and services, has lent at least 721 million dollars for the
construction of gas pipelines, 10.2 billion dollars for oil and gas
projects, 251 million dollars for electrical cogeneration, from
steam generated in hydrocarbon plants, and eight million dollars
for the construction of a thermoelectric plant that will burn fuel
oil in the northwestern state of Baja California Sur.

Bancomext, which provides financing to exporters, importers and
nine strategic sectors, has delivered some 500,000 dollars to oil
companies in the eastern state of Tamaulipas and another 446
million dollars in Mexico City. It has also provided 65.4 million
dollars to gas initiatives in the northern state of Nuevo Leon and
626.7 million dollars in Mexico City.

In addition, it has contributed 1.5 billion dollars for the
supply of gas through pipelines to the final consumer; 324 million
dollars for the extraction of oil and gas; 216 million dollars for
the construction of public works for oil and gas; 126 million
dollars for the manufacture of products derived from oil and coal;
nearly seven million dollars for oil refining; 0.65 million dollars
for the commercialisation of fuels; 0.25 million dollars for the
drilling and maintenance of hydrocarbon wells; as well as 0.25
million dollars for oil platform maintenance and services.

In February, Bancomext granted a loan of 7.1 million dollars to
Grupo Diarqco, in what it presented as the first credit to a
private Mexican company in the industry, to exploit an oil field in
the southeastern state of Tabasco.

Nafin, which grants credits and guarantees to public and private
projects, created in 2014 the Energy
Impulse Programme
for these initiatives, endowed with more than
a billion dollars.

It also manages, along with the economy ministry, the
Public Trust to Promote the Development of Energy Industry National
Suppliers and Contractors
, designed for the industrial
promotion of local production chains and direct investment in the
energy industry, which this year has a fund of some 41 million
dollars.

Missing: social and environmental
safeguards

As in the case of the Morelos Integral Project, the gas
pipelines have been a source of conflict with local communities,
arising from the lack of socio-environmental safeguards and
standards to guarantee that a project and its financing will
respect the human rights of potentially affected communities.

Nafin and Banobras lack such safeguards, while Bacomext has had
an “Environmental and Social Risk Management System Guide”
since 2017, with no evidence of whether and how it has been applied
to energy projects financed since then.

Since 2003, three platforms of international standards have
emerged, to which Mexico’s development banks have not adhered, on
human rights; social and environmental assessments and impacts; the
application of safeguards; stakeholder participation; complaint
resolution; and transparency.

The planet needs 80 percent of the global hydrocarbon reserves
to stay underground in order for the temperature increase to remain
at 1.5 degrees Celsius, as set out in the Paris Agreement on
climate change.

The treaty, signed by 196 countries and territories in 2015,
will enter into force at year-end and is considered indispensable
to avoid irreversible climate disasters and human catastrophes.

Liliana Estrada, a researcher with the Climate Finance Group of
Latin America and the Caribbean, told IPS that most investment in
energy still goes to fossil fuels.

“After the reform, they have to enter into strategic projects
and follow the guidelines of the government; they cannot go against
these strategic lines. The gas and gas pipelines became
strategic,” with the boost to the megaprojects of the López
Obrador administration, said the representative of this coalition
of non-governmental organisations and academics.

These credits are part of the fossil fuel subsidies that Mexico
has pledged, to several international bodies,
to eliminate
.

The Mexican energy industry has also attracted international
private banks, which have lent 55.95 billion dollars to 12
corporations, according to “Banking on Climate
Change: Fossil Fuel Finance Report 2020”
, released in March
by six international environmental organisations.

The CFE received some 5.4 billion dollars from 12 banks between
2016 and 2019, and Pemex received 48.3 billion dollars from 20
foreign banks.

Based on Huexca’s experience, Castellanos demanded that these
investments be stopped.

“If it’s our company, as the government says, then we can
close it down. We have to defend the space in which we live,
because we only have one planet and it belongs to all of us, it
belongs to every living being, and it is our obligation to
contribute something to this planet, because we are only here for a
short while, we are guests of the earth”, she said.

Estrada called for sustainable financing regulations and
questioned the lack of government leadership in this regard.

“Development banks must have safeguards and principles for
sustainable investment,” she said. “National regulations are
needed, which define climate finance and green finance, what
principles govern them, what are the climate risks. The trend
should be to increasingly finance green projects and less and less
hydrocarbons.”

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Mexico’s Development Banks Fuel the Fossil Energy Trade

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Mexico’s Development Banks Fuel the Fossil Energy
Trade