"The corrupt judges – are they going to continue defending foreign companies that come to loot, rob and affect the economy of Mexicans?” asks Andrés Manuel López Obrador (AMLO). The outgoing Mexican president’s typically warm welcome to international investors comes as his governing Morena party consolidates power.
Morena is seeking a constitutional amendment that would replace thousands of top judges with new, elected ones. Critics say it would leave the legal system open to abuse, with judges potentially ruling on cases involving the same drug lords and politicians that contributed to their election campaigns, says Mary Beth Sheridan in The Washington Post.
The impact of Mexico's new controversial reform
The courts have long frustrated AMLO. Now Morena is eager to remove one of the last checks on its power, fuelling fears that Mexico will return to the “one-party state” model it had for most of the 20th century. Business is less willing to invest in states with capricious legal systems. There are already signs of waning confidence, with the peso dropping more than 10% against the dollar since Morena’s victory in elections in June. The local IPC stock index has shed 11% in 2024. “Mexico’s justice system is slow and often corrupt,” says The Economist.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
But AMLO’s plans for all federal judges, including those on the Supreme Court, to be elected will only make things worse. Bolivia – the only other country in the world to have gone down that path – has had a “disastrous” experience with judicial elections, which have turned the courts from “a neutral arbiter” into a political “prize”.
At a time when Mexico should be cashing in on “nearshoring” of manufacturing supply chains, AMLO is instead jeopardising his country’s free-trade deal with the US and Canada, which comes up for review in 2026. Uncertainty about the reforms is already hurting investment. Company representatives “estimate that foreign firms are holding back some $35 billion in investment projects”, a figure approaching the amount that Mexico “attracts in foreign direct investment in an average year”, say Santiago Pérez and José de Córdoba in The Wall Street Journal.
IT, car manufacturing and natural gas pipeline projects are all reportedly stalled. Those with a very high-risk appetite spy an opportunity, says Craig Mellow in Barron’s. The bad news could be priced in following big falls in the peso and local stocks. Optimists are pinning their hopes on AMLO’s “cerebral” protégé Claudia Sheinbaum, who takes over the presidency next month. While a Morena loyalist, she is also pragmatic and doesn’t have her mentor’s “pugnacious” tendencies.
The reforms “will be watered down to something” the US can live with, predicts Malcolm Dorson of Global X ETFs. Then again, perhaps not.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
How to achieve a secure retirement, as more retirees admit to struggling with debtTwenty-six percent of retirees now have unsecured debt – a sharp rise compared to two years ago – with many underestimating how much a typical retirement costs
-
The key October self-assessment tax return deadlines to remember so you can avoid a shock billThere are two important dates for self-assessment taxpayers to remember in October
-
'Ride the recovery in emerging markets': Gustavo Medeiros of Ashmore Group tells MoneyWeekInterview What's the outlook for emerging markets? Gustavo Medeiros, head of research at Ashmore Group, gives his analysis and reviews progress in developing economies
-
'The City's big bet on green finance fails to pay out'Opinion Insurers and banks are backing away from “green finance”, and there is not much sign of the green boom we were promised. That’s a problem for the City
-
Why is English football thriving – and can it last?What has gone so right for English football? The national team has found its feet; the Premier League is swimming in money and profits are soaring
-
Should you invest in Pakistan – the Vietnam of South Asia?Opinion If Pakistan is now serious about reform, it’s time for investors to buy, says Maryam Cockar
-
'Why you must own gold and Bitcoin'Opinion The world is dedollarising, and gold and Bitcoin are the only alternatives. Buy now, says Dominic Frisby
-
'Britain is on the road to nowhere under Labour'Opinion Britain's economy will shake off its torpor and grow robustly, but not under Keir Starmer's leadership, says Max King
-
What are wealth taxes and would they work in Britain?The Treasury is short of cash and mulling over how it can get its hands on more money to plug the gap. Could wealth taxes do the trick?
-
UK bank stocks are no bargain – here's a safer alternativeOpinion Britain's banking sector faces severe political risks. Switch into this global financials trust instead, says Max King
