Judicial reform will hit investor confidence in Mexico

Significance

The overhaul has long been a stated goal of President Andres Manuel Lopez Obrador (AMLO), who claims it will reduce corruption and make judicial personnel accountable to the people. Critics say it ends the judiciary’s political independence and leaves it more vulnerable to manipulation. Concern around AMLO’s reforms appears to have coincided with a marked drop in investor confidence in Mexico.

Impacts

• A depreciated peso would normally encourage foreign investment, but uncertainty may outweigh that potential benefit.
• The weaker peso may encourage Mexicans abroad to send more remittances home, partly compensating for lower FDI inflows.
• A hastily implemented constitutional overhaul could generate tension with the new US administration that takes office in January.