Mexico's outgoing president moves forward with plans to fire 1,600 judges

Left-wing Mexican President Andrés Manuel López Obrador continues his plan to fire 1,600 judges and replace them with elected judges, creating a confrontation with businesses, foreign investors and the United States as he tries to consolidate his legacy during his final months in office.

The Mexican peso has lost more than 10 percent of its value against the dollar since voters chose López Obrador protégé Claudia Sheinbaum as president and unexpectedly gave the ruling Morena party and its allies a near majority in Congress. Investors are also now demanding the highest premium since 2008 to buy Mexico's 10-year benchmark bonds.

Investors fear that the constitutional changes Morena plans to implement will hurt the business climate, particularly a plan to fire the Supreme Court and hundreds of appointed federal judges and replace them in next year's elections.

Nationalist López Obrador, who is term-limited, will sit in the new congress for a month in September and has made clear he will not back down. Sheinbaum said the plan to transform the justice system would be among the first approved.

“They are wrong… the people who think that we are going to reverse the reform of the judicial system, which is rotten and dominated by corruption, simply because there is financial nervousness,” said López Obrador, better known as his initials as Amlo, during his morning press conference on Wednesday.

The election of judges is just one of 18 constitutional changes he proposed earlier this year, many of which could violate Mexico's United States-Canada Trade Agreement (USMCA), according to the experts. A senior US official made clear on Wednesday that Washington expects its main trading partner to comply with its obligations.

“We will continue to insist, regardless of Mexico's future legal regime, that all USMCA signatories comply with foreign investment protection provisions,” said Brian Nichols, assistant secretary of state for affairs of the Western Hemisphere, to legislators.

A charismatic populist, López Obrador considers his political movement as the beginning of a historic “transformation” of the country, commensurate with its independence from Spain and its bloody revolution.

He has centralized power in the presidency and will leave his successor Sheinbaum with a budget deficit of nearly 6 percent of GDP this year. Several of the reforms he proposes risk increasing pressure on government finances.

Many foreign and local investors view the country's justice system as a key protection mechanism against the president and his party's more radical proposals. In 2021, judges stopped the implementation of a law aimed at favoring the public energy company CFE in the distribution of electricity to the detriment of private renewable energy groups.

If López Obrador's reform results in biased or clearly questionable rulings by judges, it could lead to serious conflicts with Mexico's trading partners, said Kenneth Smith of consultancy Agon.

He added that Nichols' comments were “a signal that the Biden administration will take a hard look at what Amlo is trying to do with reforms.”

Mexico is the subject of intense investor interest due to the trade war between the United States and China, with the Latin American country hoping to divert its factories from Asia. Foreign investment has increased steadily but has shown little sign of the boom some had hoped for, and López Obrador's reforms could give businesses pause.

Under his plan, members of the Supreme Court and 1,600 other judges would be fired. Voters would choose nine new high-ranking judges from a list of 30 candidates proposed by lawmakers, the president and the judiciary, and elect hundreds of new federal judges.

“It would destroy the justice system,” Ana Laura Magaloni, a legal expert, told local radio. “This would end the certainty that federal justice gives to the USMCA world and to investors.”

Magaloni said the reform aimed to dismantle the more professionalized federal system while ordering states to amend their constitutions to directly elect thousands of additional local judges. Local systems handle the vast majority of cases and have been neglected by the government for decades, she said.

Judicial election campaigns would in theory not benefit from any public or private funding, but illegal money from the private sector and organized crime is common in Mexican elections, with poor oversight, experts say. More than 30 local candidates were assassinated during campaigns for this year's presidential, parliamentary, state and municipal elections, as criminal groups tightened their grip on local politics.

“If there is no money for campaigns and there are only debates, public attention to this subject will be practically zero,” said Luis Carlos Ugalde, former head of electoral authority and director of Integralia Consultores. “Organized crime could place winning candidates into judgeships. . . This is a huge risk that does not exist at the moment.

Since her victory, President-elect Sheinbaum has tried to adopt a more moderate tone without contradicting the president, promising a dialogue to discuss reform, particularly with academics and legal associations across the country.

Mexican legal experts fear there will be little room to change the proposals.

“This marks a before and after for the justice system as we know it,” said Juan Jesús Garza Onofre, a researcher at the National Autonomous University of Mexico. “There have been consultations before, there have been forums and, in the end, often they are not really taken into account.”