Mexican regulators are clamping down on private investment in the energy sector in the latest attempt by the nationalist government to protect state oil and utilities companies, according to documents seen by the Financial Times.

The move escalates months of government efforts to abruptly change the rules in the sector that have soured investor sentiment, sparked a flood of injunctions and raised the prospect of litigation under international trade treaties, including the new North American trade pact, USMCA.

According to the documents, the energy regulator CRE is implementing an appeal issued by President López Obrador to regulators last month to ban new energy permits — a move that covers everything from renewables generation to gas stations.

Analysts and former officials say the policies are a backdoor attempt to discriminate in favour of Mexico’s struggling state oil company, Pemex, and state utility, CFE, without changing the law.

López Obrador, a fervent energy nationalist, sees the former monopolies as national champions and says past policies allowed for the foreign “conquest” of the country’s energy sector.

The government has displayed “a spectacular degree of stubbornness” in continuing to seek new ways to curb private sector involvement, said the chief executive of one renewable energy company.

The documents instructed officials to “abstain from implementing processes” laid out in three regulations from 2017 and 2018.

Those related to updating and authorizing permits, greenlighting generation activity, imports and exports. The move ensured that such decisions now had to go through the CRE board, a former energy official said.

López Obrador has appointed political loyalists to the CRE board, including a 91-year-old refinery expert, José Antonio Celestinos, who last week approved new curbs on some private generators saying: “[I vote] in favour, in accordance with the president’s instructions.”

A CRE spokeswoman said they were internal documents which “modified internal processes in support of the fight against corruption and transparency” and should “not be misinterpreted.”

López Obrador is a fierce critic of the landmark 2013 energy reform, which included allowing private investment in Mexico’s long-closed oil and gas sector. But he says he will only seek to change the law if his attempts to “rescue” Pemex and CFE founder.

The renewables CEO called the permit ban “a new chapter” in Mexico’s clashes with the private sector” and “absolutely extreme and absurd.”

He added: “They’ve halted private sector investment in energy completely.”

One former senior government official said companies were “preparing for the legal battle that will come . . . The idea of injecting more money into the country as of now is a no-go. They’re trying to protect the investments they’ve already made.”

That could include triggering investor protection mechanisms under USMCA, the Trans-Pacific Partnership treaty and pacts with EU countries.

“We are very concerned with actions by the Mexican government to deny U.S. energy companies fair market access,” said Geoff Moody, vice president of government relations at the American Fuel and Petrochemical Manufacturers.

International oil majors and power companies have invested billions of dollars in Mexico. “We’ve put new investments on hold,” said one executive at a European power company, adding that international arbitration “is being considered very seriously”.

One source close to Onexpo, Mexico’s national association of petrol station owners, said 154 permit applications had been “frozen” by the CRE — the very authority supposed to ensure that the law is applied.

“They’re achieving very little but the destruction in terms of investor and regulatory certainty is very big,” said the former energy official.

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