On 11 September 2024, Mexico’s Senate approved the country’s much-discussed judicial reform, which the lower chamber passed on 4 September.
Southern Pulse Founder Sam Logan recently wrote that while Mexico does need judicial reform, this shakeup is not the type of change the country needs. Many investors, businesses, and citizens are alarmed about these highly controversial reforms.
Below, our team analyzes how these reforms would change the judicial system and fail to address its real problems. We also highlight three key impacts this reform would have on businesses in Mexico.
Are the reforms a done deal?
The judicial reforms are destined for the president’s desk after receiving enough support in both chambers of Congress and state legislatures. However, they could still be challenged in the courts, including the Supreme Court.
As of 12 September 2024, the reforms had passed in both chambers of Mexico’s Congress and, according to CNN, 19 state legislatures (only the state of Querétaro had rejected the measures). Since the reforms needed approval from at least 17 of Mexico’s 32 states to move forward, they are now expected to return to the Senate and be sent to President Andrés Manuel López Obrador’s desk for signature and publication in Mexico’s official gazette (DOF).
There is still one thing that could keep the changes from passing — opposition parties challenging them in the Supreme Court. The PAN party, which leads the opposition movement, has already announced it would challenge the reforms in court.
There are grounds under which the reform could be challenged constitutionally. However, there is confusion as to how a Supreme Court dissent would look in this case, considering the Supreme Court itself is affected by the reforms.
The assumption (and likelihood) that the reforms will be codified has already fueled a strike among members of the judicial system and citizen protests.
Why are the reforms so controversial?
When López Obrador first announced these reforms on 5 February 2024, many believed it was less likely they could be approved. Then, the ruling party MORENA won the general election on 2 June 2024, further cementing its popularity and control at the federal and state levels. Why López Obrador decided to try to push these reforms through at the final hour of his presidency — right before Claudia Sheinbaum is set to replace him on 1 October 2024 — is an open question without a clear answer.
We know that President AMLO has been fixated on cementing his legacy in the country, and yet the reforms place a heavy burden on Sheinbaum that may strain his party’s reputation in the long term. The reforms would be expected to have a significant economic impact by weakening the Mexican peso and the country’s rule of law, driving away foreign investment, and possibly inviting more legal issues with the US and Canada under the United States-Mexico-Canada Agreement (USMCA).
The judicial reforms are controversial for a few key reasons:
Judges would be regularly elected, just like local, state, and federal representatives.
This is concerning because elections in Mexico are already characterized by high levels of violence and influence by organized crime and other corrupt actors. The reform would also cut the number of justices on the Supreme Court from 11 to 9, setting the length of their terms between eight and 14 years based on the number of votes received. The changes would also call for naming a new president to the Supreme Court every two years.
Judges being voted in and out regularly could cause several issues:
The practice would create a lack of continuity for cases that already take years to advance through a court system with one of the lowest rates for closing open cases in Latin America.
It would allow a heavier hand by these corrupt or criminal actors to put people in positions of power, further fueling impunity.
It would sow the seeds of creating a judicial system that responds to a shifting political climate and therefore is not independent — a pillar of a democracy.
It could help corruption flourish. On the surface, appointing judges by popular vote seems like it may disallow corruption to take hold, and in some cases, it might. However, given the influence of organized crime in Mexican elections, the few bad apples that get voted out are likely to be replaced by more bad apples. These new judges may be even more heavily influenced by bad actors, assuming the reforms are cemented legally as they are currently written.
A single disciplinary council would oversee the entire country’s judicial system.
This is concerning because the current version of the reforms would put five people in charge of policing more than 50,000 employees — 6,500 of whom would be subject to regular elections. The reforms could also have another, more worrisome implication — judges may feel unable to make impartial decisions under this new structure.
If judges can be taken to a disciplinary council for related proceedings:
Outside parties could have more of an influence over the cases they are overseeing. This would be particularly concerning for high-profile cases that gain national and international media attention.
The disciplinary council itself would be selected by popular vote, which would allow further opportunities for corrupt influence and abuse of power to enter the Mexican judicial system.
The Sisphysian task of policing a workforce of 50,000 people with five individuals would likely make it harder to ensure that judges suspected of wrongdoing appear before a judiciary council, let alone bring disciplinary action against them.
A source close to Mexico’s legal system told Southern Pulse that the reforms currently propose dropping the age requirement of 35 for magistrates and decreasing their required work experience to a mere five years. If this happens, it would present several additional concerns:
If the age requirement is dropped, important investigations and decisions would be put into the hands of those who do not have the knowledge or wisdom required to oversee them.
Individuals with only five years of experience do not have sufficient exposure to the legal system to make final decisions about how to interpret and apply the law. Judges are usually brought in during the middle or later stages of their careers. Carving out experience in law and policy is an integral element of a functioning democracy.
The reforms would also promote using “faceless judges,” a mechanism previously used in countries such as Colombia but harshly questioned by international human rights organizations. Anonymity could be used to protect the identity of judges in cases that could put their integrity at risk, such as those related to organized crime, but it is a double-edged sword that also allows for less accountability.
The reforms fail to address real issues
In nearly every Mexico-based investigation Southern Pulse has conducted over two decades, there is almost always a stone that uncovers a bad apple with ties to a public servant in the judicial system, judge or otherwise. Even Mexico’s citizens perceive the country’s judicial system as highly corrupt, per the Mexican Institute of Statistics and Geography (INEGI).
While President López Obrador claims the reforms will help combat organized crime, allowing judges to anonymously oversee cases involving this perennial challenge to security is like trying to put out a wildfire with a cup of water.
Less than 4% of criminal investigations are solved in Mexico, and one reason is that only 4.3% of criminal investigations are formally connected to a court case. If millions of investigations are open annually and fewer than 4% are solved, impunity is the bigger issue here.
Investigators need more resources, and prosecutors need more support. Without additional resources, investigations would continue to go unsolved, and fewer cases would see justice prevail in court. Mexico’s failure to address this reality further contributes to a chronic underreporting of crimes in the country. INEGI reported in 2022 that 93.2% of the crimes committed in Mexico were unreported or never subjected to a formal investigation. This has been the case for more than a decade and would not improve under the judicial reforms as they are written today.
Three risks to business, and two opportunities
Southern Pulse has identified three risks that López Obrador’s judicial reform could pose to businesses operating in Mexico, and two opportunities.
Risks
Regularly electing judges via popular vote would be a major blow to the private sector and investors alike. Judges rotating through the courts every few years would pose major issues for multi-year arbitration. Companies would further lose confidence in a system already mired with corruption and partiality, which would drive down both foreign direct investment and Mexico’s favorability on emerging market indices.
The reform would further damage the perception of the country’s rule of law, impacting risk ratings across industries. This means companies would have to spend additional resources and further justify entering, expanding, or investing in the Mexican market. Depending on the industry, location, and type of investment, Mexico already has a medium or high risk rating.
The current language of the reforms would allow impunity to continue to thrive. Few investigations are solved in Mexico, and even fewer cases see their day in court. Electing judicial officials would allow criminals to hand-pick the individuals they seek to have in those roles, with the risk being particularly high at the local and state levels. This inevitably makes business harder to conduct in Mexico and makes the country a less attractive place for investment. Insecurity is already a top concern for businesses and investors in Mexico, and these reforms would only further contribute to the rising insecurity prevalent throughout López Obrador’s administration.
Opportunities
In our experience, many private-sector companies fail to conduct truly thorough due diligence as it relates to everything from employee background checks to massive M&A transactions. Cutting corners to save money and merely checking boxes when it comes to due diligence can mean paying a hefty price down the road. Southern Pulse would love to work with you on this. But whether or not you choose us, be sure to hire a team that truly can conduct discreet fieldwork and access a significant source network (not just 3–5 people) while properly checking records. Adding an additional zero or two to your due diligence budget may pay dividends in the form of five-plus zeroes you avoid when your company does not have to engage with this judiciary system.
While the private sector often sits back and reacts to government decisions, Mexico’s judicial reform is an exception. Companies should be loud in voicing concerns over how this would impact their business interests in the country. Observers have differing opinions about how independent Sheinbaum would be from her predecessor. Still, even if citizens and businesses alike do not view these reforms favorably, they must continue to shine a light on them and will need to exert pressure on the incoming Sheinbaum administration.
Whether it’s Mexico or elsewhere in Latin America, Southern Pulse has the experience, network, and relationships to simplify this challenging region with honest, direct answers to your most complicated questions.
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