Following the feel-good Three Amigos Summit in January, it’s back to the tough work of managing crises and trying to create opportunity in North America.
This past Sunday, well over one hundred thousand Mexicans took to the streets in Mexico City and cities across the country to protest President Andrés Manuel López Obrador’s latest move to undermine the country’s independent electoral watchdog agency, known as the National Electoral Institute or INE. Founded in 1990, INE is credited internationally with laying the foundation to bring an end to seven decades of single-party rule and ensure the integrity of the electoral process.
New legislation passed by Congress last week— President López Obrador’s so-called “Plan B”— would cut the INE’s budget by a third, eliminating thousands of jobs focused on organizing and monitoring elections. Critics say the reforms would stifle the electoral agency ahead of Mexico’s 2024 presidential elections, posing a threat to the country’s democracy.
Over the past few days, López Obrador has dismissed the protestors’ concerns as well as criticized media coverage of the march and the US Department of State’s moderated response to the reforms. Now opponents plan to challenge the constitutionality of the reforms before the Supreme Court. It appears likely that the justices will revoke parts of the reforms or invalidate the reform decree.
The Supreme Court decision may come out in the next few months just as the campaign season is ramping up for the next presidential election cycle. While López Obrador is barred from being re-elected for another six-year term, his approval rating remains at nearly 60 percent and candidates from his party MORENA are ahead in the polls. Yet, the head of the think tank México Evalúa Luis Rubio maintains that despite López Obrador’s popularity, judicial and political challenges could hinder his electoral aspirations for 2024.
On trade, little progress has been made on energy and corn disputes. The three countries continue in the dispute process under the US-Mexico-Canada (USMCA) trade agreement over Lopez Obrador’s energy reform that favors state-owned companies.
This month, Mexico delayed the ban of genetically modified (GM) corn for animal feed. However, it appears Mexico will be moving ahead with a ban on GM corn for human consumption, which currently makes up 20 percent of US corn exports to Mexico. The US Trade Representative plans to engage in resolution talks and is considering another official USMCA dispute on Mexico’s corn ban.
On Tuesday, López Obrador announced that Tesla will build its first Mexican factory in the industrial hub of Monterrey. This new plant in northern Mexico will be worth $5 billion and create 5,000-6,000 new jobs. As part of the deal, Lopez Obrador said Tesla made commitments to address water scarcity in the area.
While the Tesla news is encouraging, USMCA disputes and continued unpredictability in Mexico’s policies could give foreign investors pause in the future. Moving forward, Mexico will need a solid long-term investment strategy to fully capitalize on much needed nearshoring opportunities. If this is achieved, experts estimate that nearshoring efforts could bring between $60 and $150 billion in investment to Mexico over the next ten years.
On immigration, despite facing criticism on all sides, the Biden administration’s border plan announced in January has largely kept down the number of irregular crossings. The administration is now working on new restrictions on asylum eligibility before the anticipated end of the Title 42 expulsion policy in May. This would disqualify asylum requests from migrants who don’t apply for a parole program or register via the CBP One application to present at a port of entry. In addition, the administration is negotiating the ability to deport non-Mexicans back to Mexico post-Title 42.
Here at White & Case Mexico City, we will continue to monitor the latest developments in-country to provide the very best service to our clients. You might have seen that the firm was recently recognized in the Chambers Global 2023 legal rankings and LatinFinance’s “Deals of the Year” awards.