Bank of America calls judicial reform “very high risk”

Mexico City. The proposal for judicial reform presented in February by President Andrés Manuel López Obrador, which will be discussed by Congress that begins sessions in September, represents a “very high risk” for the corporate sector in Mexico, warned the US bank Bank of America (BofA).

In an analysis distributed to its clients, the financial institution’s research department places the plans that the federal Executive has proposed to change the status of Petróleos Mexicanos (Pemex) and the Federal Electricity Commission (CFE) from a productive company to a public one, as well as the elimination of autonomous organizations, in the same condition. In all three cases, it anticipates that the reforms will be approved.

The three reforms are part of the so-called “Plan C,” which consists of deepening legal reforms in various sectors, and according to the president, their objective is to benefit the people and the country and not a minority.

While BofA expects the discussion and eventual approval of the reforms to generate volatility in the short term, “we are still encouraged by the long-term opportunities.”

Given the above, the US institution did not make any changes to its investment portfolios in Mexico.

Judicial issues, the highest risk

In the analysis titled The next 90 days could shape the next decade for Mexico: staying on the defensive, BofA states that the reform of the judicial branch is the most important since “it has enormous implications for how democracy works” in our country.

“The most worrying and consequential reform presented in Plan C is the constitutional reform to review the judicial system, with the aim of eliminating the 7,293 sitting judges in Mexico, as well as the 11 judges of the Supreme Court. AMLO’s main objective is for all judges in Mexico to be elected by popular vote,” he added.

This week, the American investment bank Morgan Stanley recommended its clients not to invest in shares of some Mexican companies and to reduce their participation in others, arguing that the initiative to reform the Judicial Branch “will increase risk premiums in Mexico.”