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Mexico City (APRO) – President Andrés Manuel López Obrador’s judicial reforms continue to weaken Mexico’s position in financial markets. This week, multinational financial company Morgan Stanley raised the risk profile of investing in the country as the amendments are likely to be approved by September next year.
After the June 2 election, President Andrés Manuel López Obrador announced that he and his party would insist on ratification of his 20-point constitutional reform package, which included judicial reform, but this was not well received in financial markets.
Although President-elect Claudia Sheinbaum has been reassuring domestic and foreign investors since June that they have nothing to worry and that “it is safe to invest in Mexico,” nervousness has persisted, with the Mexican currency falling against the dollar and now Morgan Stanley downgrading its recommendation on investing in the country.
“We downgraded Mexico to underweight after the executive branch sent a judicial reform proposal to Congress. We believe replacing the judicial system would increase risk, Mexico’s risk premium, and constrain capital spending. This is a problem because nearshoring is reaching a critical bottleneck,” Morgan Stanley said in its report, “Latin America Portfolio Model.”
The financial company also advised its clients to reduce their exposure to stocks of Mexican companies such as Wal-Mart de Mexico (Walmex), Fomento Economico Mexicano (FEMSA) and Coca-Cola FEMSA; and to remove Quálitas, Kimberly Clark México and Laureate from their portfolios.
Morgan Stanley did not change its recommendations on six Mexican companies: América Móvil, Cemex, Fibra Prologis, Grupo México, Banorte and Cuervo. On the other hand, the financial company added Grupo Alfa de Monterrey to its portfolio of Latin American investment recommendations.
But financial firms are not the only ones pointing to the potential impact of justice sector reforms. This week, business leaders from the United States and Canada told their respective countries’ ambassadors that the reforms are creating uncertainty for investors, a sentiment echoed by the Mexican Republic’s Employers Confederation (Coparmex).
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