How Mexico’s judicial reforms could affect infrastructure investments

The judicial reforms proposed by Mexico's ruling party Morena threaten to affect all areas of business including the infrastructure sector, bringing uncertainty for private investment, BNamericas was told. 

According to Juan Carlos Machorro, a partner in charge of the transactional, financial and infrastructure area at law firm Santamarina + Steta, this is not the best path that the incoming administration led by Claudia Sheinbaum should go down on. 

“You cannot scare off private investments when you are part of the largest commercial front in the world, when you have an opportunity like nearshoring and when you have so many infrastructure needs,” he told BNamericas. “And you cannot do that when [the country’s] finances are so compromised after this last year and we don’t understand the need to start [the new administration] on the wrong foot.”

The reforms, promoted by current President Andrés Manuel López Obrador, would introduce judges elected via popular vote, an element that has sparked controversy and has worried the US and Canada. 

Washington’s ambassador to Mexico, Ken Salazar, said on Thursday, according to news agency EFE, that the suggestion to elect judges threatens to bring “fierce politization… [and] endanger the historic trade relation that we have built and that depends on certainty for investors.” Ottawa’s ambassador to Mexico, Graeme C. Clark, also said on Thursday that Canadian investors have expressed concerns related to the proposed reforms. The three countries are partners in the USMCA trade agreement.

López Obrador, whose term ends October 1, described the comments as "unfortunate" and "imprudent."

Roberto Hernández, a lawyer and expert in international construction law, told BNamericas that, from the perspective of protecting contractors' interests, the reforms could have a very serious impact.

“Disputes arising from public works contracts are currently handled by the federal court of administrative justice. This special court won't be affected. But there are other works contracts managed by, for example, [national oil company] Pemex, which are handled by the federal judicial branch,” he said. “If you change the entire judicial system, you leave it inactive… making access to justice impossible for those who need it. The courts are overloaded.”

Hernández added that judges elected via popular vote would not have the experience that others have, and “there would be a costly learning curve in terms of time.”

Machorro goes further. “It’s not only about temporarily rendering the justice system inoperative, it’s about the uncertainty that not having a justice system based on a concept of judicial careers creates. Choosing the judges through popular vote would politicize the administration. The only example where federal [sic] judges are elected in that way is Bolivia since 2009, and it has been a complete and resounding failure.”