Mexico is the country that never misses the chance to miss an opportunity, an analyst recently said when discussing nearshoring and the blow that the judicial reform would represent to the economy.
Looking at it from the outside, he continued, it’s hard to understand why Mexico insists on making decisions that hinder its growth.
The judicial reform will have harmful impacts on the country, not just from an economic perspective of course.
I think it’s naive to argue that it will “democratize” access to justice and eliminate corruption. Those who promoted and voted for it know that it will lead to setbacks, making the country less democratic and more authoritarian.
Before the reform, the GDP growth expectations for Mexico’s economy were around 1.7% this year, even below the mediocre 2% that had been so criticized. If Mexico grows at that rate during a period of nearshoring and in an election year with rampant spending, what can be expected in a year without these economic drivers?
Growth forecasts will be adjusted following the publication of the reform. Some banks have already done so, estimating that Mexico will grow 1.2% this year and 1% next year.
Beyond the exchange rate — which responds to much more than just internal policies — the real problem will be what we don’t see: the investment that won’t happen, the foreign investment announcements that won’t materialize, the jobs that won’t be created, the growth and development that won’t arrive.
That will be the real crisis: the stagnation of an economy that could have grown but chose not to.
In terms of magnitude, the judicial reform is the most harmful so far, but the ones on the horizon will not be harmless, and the relationship with our trading partners will only get more strained.
The elimination of the figure of state-owned productive enterprises could violate Chapter 14 of the USMCA by restricting investment in the electricity sector. The reform limiting the trade of genetically modified corn would violate Chapter 3 by restricting access to a market not excluded from the agreement. Additionally, the elimination of autonomous bodies would contradict other articles, such as Article 18 on telecommunications and Article 21 on economic competition.
In the specific case of the judicial reform, there is concern that administrative acts may not be impartial, which would violate Chapter 29 of the USMCA. Intellectual property protection could also be compromised, contrary to what is established in Chapter 20.
These issues could arise from a judiciary that, due to a lack of independence and skill, fails to fulfill its duty to maintain fair conditions for all economic actors. The 2026 review could turn into a renegotiation.
Just as today we don’t know what would have happened if the banking sector hadn’t been nationalized in 1982, or if Mexico hadn’t opened up to international trade, or if the 1994 crisis hadn’t occurred, or so many other things — the list is long — we won’t be able to fully grasp the impact of missed opportunities or the gradual regression these reforms represent.
They say that “what if” doesn’t exist. That may be true. But it could also be that we are simply unable to see it.
This article was originally published in Spanish by El Universal newspaper.
Valeria Moy has been the director of the Mexican think tank IMCO (Mexican Institute for Competitiveness) since 2020. She is an economist with degrees from the Autonomous Technological Institute of Mexico (ITAM) and the London School of Economics. She is a regular columnist for El Universal and El PaÃs newspapers and was named one of the 100 most powerful women in Mexico by Forbes.
“Incoming economy official predicts foreign investment in Mexico could nearly double under Sheinbaum”
MND Staff
September 20, 2024
Economics is called “political economy” (I had a grandfather who taught it in college) and with this economist’s politicking here I see why. After 44 years of actively practicing law in California which has an economy 3 times greater than Mexico and a judiciary which is entirely subject to elections, it outrages me to see lay people like Ms. Moy pass themselves off as having the competency to address legal issues like the judiciary and then do so trumpian-like replete with innuendo but without evidence. On its face, judicial elections will transform the Mexican judiciary from an autocratic-elitist institution to a democratic one. However, it will not end corruption and democracy will not guarantee justice any more than does autocracy. Ms. Moy would do well to study logic before writing another opinion piece.
Sir, as a former attorney, you should do your research before referring to Ms. Moy as an incompetent layperson. She holds a degree in Economics from ITAM and a Master’s degree in Administration from the London School of Economics. She is the General Director of the Mexican Institute for Competitiveness (IMCO). She has worked at the National Banking and Securities Commission in the areas of Development and Economic Studies, Market Supervision and Stock Market Supervision; at American Express as a consultant for the Strategic Planning and Business Development Group; at Grupo Nacional Provincial as Director of Treasury; and is currently General Director of the research center “Mexico, How Are We Doing?”
She has taught macroeconomics courses at the undergraduate and master’s levels. She was a senior researcher at Harvard Business School and a part-time professor at ITAM. She is a weekly columnist for El Financiero and frequently participates in interviews for radio, television, and print publications with various national and international media.
Exactly what type of qualifications do you think are needed for a Mexican citizen to analyze actions taken by the current government?
Bravo Mr Coles! Gracias.
Mr. Burns has long displayed an inclination to insulting the intelligence of anyone who questions the socialist agenda of AMLO and leftist Mexico in general. Welcome to the club.
Do you really believe government officials ? Pleeese !! Don’t be so naive. The damage has been done and there’s no going back. In 6 years there. Will be a chance to get rid of these tyrants , but I honestly doubt it, may God bless Mexicans , they deserve better !!
My first thought when I saw the US objections to Mexican judicial reform was that some ‘well-intentioned’ foreign business people are worried that all the hard work they put in to have their people in the right places could be upset by democracy. That’s my second thought, too.
Ms Moy brings a brilliant analysis of what if’s to the table. As a person whose job it is to bring foreign investment to Mexico she clarifies exactly what’s going through everybody’s mind on these new reforms, scary as it is. We now have a plethora of Mexicans who want to invest outside of Mexico and foreigners who want to hold back on investments in Mexico. Bravo to the new government for causing this twist to occur. I personally experienced two Asian companies considering Mexico that are now going to Texas but, again Bravo to this new government!
As a retired economist living in Mexico since 1992, I echo Moy’s lament. Mexico can seem to often miss better targets. But Mexico has in its favor an extraordinary resilience which when coupled to their strong work ethic pulls them out of the missed target. Viva Mexico!
All the risks described are real and accurate. They are not yet ‘realized’ and so we must wait and see if the new President will have an impact ‘down the list’ as they can be improved or eliminated. Unfortunately this is the only risk management plan we have left. Fingers crossed and hope for the best. The fear of these missed opportunities is real but so is the fear by some of what they saw as corruption in the past. These fears compete and, for now, the one that may stymie much needed growth is the path that we will walk together, like it or not
In California, many judges are elected by the citizens. I fail to see why closing off an avenue of nepotism in Mexico will lead to the dire economic results the author refers to. For me, it is far more concerning that AMLO can pull the plug on Claudia Sheinbaum in 3 years (using his Morena base) if she doesn’t follow the program he dictates. She should be able to serve out her elected 6 year term, as she sees fit, without fear of reprisal.
I agree with Valeria Moy, The “worst” economy is yet to come. AMLo will still be giving “advice to the President, He is simply not going to completely “disappear” from the political scene. I am afraid that Claudia won’t be in “control” of the country but only on “paper”. Just mark my word, that is what is going to happen”, Claudia won’t be able to operate and run the country the way she wants too. AMLO just “won’t go away”, The economy is going to suffer badly and not going to grow substantially to make a big difference in peoples “daily life’s. The poor people aren’t going to see an improvement or a reduction in their poverty, Claudis administration if filled with a bunch of “”dumb” and “stupid” lawyers that don’t “know how to solve real problems” (but keep cheating the people for their own “good” and the government).
Carlos Sims is right, the “poor will remain” poor all their lifes simple because of the “wrong decisions made by dumb “Ex Presidents’ like AMLO who likes to give advice that is worth “crap”(caca).
Do I hear echoes of “Manifest Destiny”, or the Monroe Doctrine? It is time to move forward, not backward.
Changing paradigms that had benefited international and local elites is what is all about.
Mexico is daring to explore many other possibilities of development. Adjustments are needed, sure.
Regarding the reform: The US Supreme Court partisan political issues -and apparent lack of ethics- it is not a model to follow. It is necessary to find alternatives if the old does not work. That is what Mexico is doing. “New wine must not be served in old cups”