Concerns about Mexico’s institutions could erode the country’s investment attractiveness
Firms should continue to monitor developments on the electoral front. First, if the reform is quickly ruled constitutional, it could signal that the president and his party already hold undue influence over the country’s high courts. Firms already cite institutional weakness and a weak rule of law as the most critical challenge of doing business in Mexico, and the shrinkage of yet another key regulator could further weaken investment appetite. Furthermore, the reform would ultimately favor MORENA, a non-market-friendly party that could continue chipping away at Mexico’s institutions, worsening the operating environment for MNCs.
- In March, Mexico’s Supreme Court took on a legal challenge against the electoral reform pushed by the Andres Manuel Lopez Obrador (AMLO) administration. The reform, which passed in a watered-down form in Congress, would debilitate the National Electoral Institute (INE), Mexico’s election regulator, raising concerns of democratic backsliding.
- The INE, which was established in 1990, became a bastion of democracy in the post-one-party rule era. While an initial attempt to reduce the INE’s role in overseeing elections was toppled last year, as it would have required changing the constitution, in February, the AMLO administration successfully pushed a more recent reform to cut the INE’s budget and reduce its workforce.
- After the bill passed, the INE issued a legal challenge to the reform, which is slated to be reviewed by the Supreme Court. During the review period, the reform will be put on pause, which should temporarily safeguard the INE’s authority.
- Congress and the presidency are now required to put together responses to the challenge, a process that is likely to span a few weeks. It is not yet clear how long it will take the Supreme Court to assess whether the revamped reform is constitutional.
The Supreme Court’s decision to take on the case and pause the electoral reform in the interim is overall a positive development, as it signals that judicial independence persists despite democratic erosion. While the timeline of the case remains unclear, it should grant the INE some breathing room during the gubernatorial elections in Coahuila and the State of Mexico, which are scheduled for June. Beyond that, if the Supreme Court were to rule that the reform is indeed constitutional, the move would likely expand presidential power over elections, as the regulator would be unable to exert the same level of oversight as it has during the past two decades. Although we believe that the 2024 elections are likely to lead to another MORENA presidency regardless of whether the INE retains authority, lacking an independent electoral regulator could enable MORENA—or another party in power—to sidestep checks and balances in future elections, turning back the clock on Mexico’s democracy.
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