Mexico City.- U.S. companies are delaying investment plans in Mexico amid concerns and discussions about how a restructuring of the country’s judicial system would affect their businesses, The Wall Street Journal reported.
The reform promoted by the Government of Andrés Manuel López Obrador, a constitutional amendment that is expected to be approved in the coming days, has worried foreign investors who fear that judges will become dependent on voters or political considerations instead of the law.
“Company representatives and advisers estimate that foreign firms are holding back some $35 billion in investment projects in sectors ranging from information technology and auto manufacturing to gas pipelines and industrial infrastructure because of uncertainty surrounding the reform and the U.S. election,” the Journal said. “That figure is roughly equivalent to what Mexico, Washington’s largest trading partner, attracts in foreign direct investment in an average year. Recently, most of that investment has come from companies that reinvest their profits.”
At stake, according to the Journal, is another $18 billion in private investment that Mexico needs to meet growing demand for electricity for industrial use. The country’s Supreme Court blocked initiatives that could have disrupted Mexico’s electricity sector in violation of the USMCA, but some investors fear that a newly elected court will eventually approve them.
“Costly international arbitrations over investment rights are likely to increase as companies try to avoid Mexican courts. Corporate lending in Mexico would also be affected due to the uncertainty, according to bankers,” the newspaper added. The reform also risks undermining negotiations to revise the USMCA in 2026, according to Global Companies in Mexico, a group of senior executives from some 60 companies operating in the country, including US giants such as AT&T, FedEx, 3M, PepsiCo, Honeywell International, Cargill, Visa, MetLife and General Motors. Earl Anthony Wayne, a former US ambassador to Mexico, said US executives have told him they are pausing investments in Mexico while they wait to see how the judicial reform plays out. He added that Mexico will find it difficult to attract so-called offshore investment to compete with China, create jobs and fight poverty, if the reform is approved as expected. “Mexico is going to get a lot of negative attention,” said Wayne, who is a fellow at the Wilson Center, a U.S. think tank. Another factor making foreign companies concerned about working in Mexico is a possible U.S. presidential election victory for Donald Trump, who wants to impose more tariffs on imports.
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