Judicial elections: will Mexico’s bold political experiment come at a cost?

Mexico is about to become “the first country in the world where every judge on every court is chosen by popular vote”, says The Economist. Judicial elections this month attracted little attention, with just 13% of voters turning out. Yet the implications could be far-reaching, with the contests overwhelmingly won by candidates with links to Morena, the left-wing ruling party. Supporters argue that reform is needed to root out corrupt judges. Opponents say that politicised judges remove the last meaningful check on the government of president Claudia Sheinbaum, which already commands congressional super-majorities.

What does Sheinbaum's consolidation of power mean for Mexico?

Writer Mario Vargas Llosa once dubbed Mexico the “perfect dictatorship”. Despite regular elections, the Institutional Revolutionary Party (PRI) exerted such dominance that the country was effectively a one-party state for much of the 20th century. Democracy took root after the PRI lost power in 2000, but now the country may be reverting to type as Sheinbaum consolidates power. Investors don’t appear to be worried. The local Mexbol stock index has gained 17% this year and hit a record high last month. Sheinbaum has defanged “Trump’s threats on trade”, says Craig Mellow in Barron’s. To general surprise, the “cerebral engineering Ph.D.” has proved a canny orchestrator of “drug-war theatrics”, dispatching army helicopters to blow up drug laboratories and handing dozens of “cartel capos” to US authorities.

Mexican shares still trade on a reasonable 12.2 times forward 12-month earnings, cheaper than the ten-year historical average of 13.6, say Kelsey Butler and Vinicius Andrade on Bloomberg. Latin American shares have spent the past decade struggling amid weak commodity prices, a strong US dollar and fractious politics, says Dan Lefkovitz for Morningstar. That left the region deeply out of favour, yet perhaps the rush for the exits was a “contrarian indicator”. The Mexican peso is up 9% against the US dollar this year. At a time of global trade uncertainty, investors appreciate the “defensive” nature of Mexican stocks, which boast “strong balance sheets” and are biased towards “steady” segments such as consumer staples.

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For all the trade squalls, Mexico’s proximity to the United States still gives its manufacturers a “near-shoring advantage”, adds Mary Anastasia O’Grady in The Wall Street Journal. But in the long-term, “terminating the independent judiciary” will come at a “high cost”. Foreign capital will be much warier of investing in a country where the legal system acts as a “subsidiary” of the government rather than an impartial enforcer of the law. Without credible contracts and property rights, the path to prosperity becomes much more difficult.

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