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Know Your Risk: Business Implications of Mexico’s Judicial Reform

In 2024, Mexico underwent a major constitutional overhaul that introduced popular elections for judges and Supreme Court justices. The first of two rounds of judicial elections took place in 2025, with newly elected judges and justices now in office.

The reform explicitly intends to bolster direct judicial accountability to the people. Risks include the weakening of the separation of powers, as political incentives between powers converge, and contextual factors potentially overwhelming legal considerations in judicial decision making.

This working paper analyzes the reform’s practical implications and outlines key considerations for companies as the reform reshapes Mexico’s business environment.

An Electoral Reform to Mexico’s Judicial Power

On September 15, 2024, Mexico’s reform to its Judiciary was enacted.¹ Proposed by then-outgoing president Andrés Manuel López Obrador, it had the support of his then-incoming successor, Claudia Sheinbaum. Its approval was made possible by the congressional supermajorities obtained following that summer’s elections by a ruling coalition that is also in power in 24 of the country’s 32 states.

The reform explicitly changed the operating logic of the courts. Its stated objective is to “include in the Constitution safeguards and democratic mechanisms” so that judges “are responsible to society […] and sensitive to the problems faced by citizens.”² All judgeships, including at the Supreme Court, are now subject to popular election. Candidates are to be nominated by each of the three branches of government. A five-member Judicial Discipline Tribunal, also to be elected by popular vote, was put in place.

Mexico’s public commitment with the rule of law remains. Constitutional forms persist, checks and balances are still in place, and multiple decision-making centers are active and influential. But the role of Mexican courts in applying the rule of law is now, by design, more exposed to social and political dynamics. Legal grounds and legal merits and expert opinions now more explicitly interact with traditional political and electoral dynamics – even at the highest court.

Overall, from a comparative perspective, Mexico’s 2024 judicial reform is unprecedented. Most democratic systems rely on appointment-based mechanisms as a safeguard for judicial independence. While some jurisdictions use limited judicial elections, Mexico’s reform extends this model to all of the Judiciary, including all forms of appeal.

Given the lack of precedent with judicial elections, the absence of a tradition of electoral competition for judicial roles, the role played by the Executive and Legislative in selecting candidate lists, and the less technically experienced profiles of the incoming judges, rule of law considerations have become less predictable.

For the business environment, this means less certainty.

Implementing Mexico’s Judicial Reform

A first round of voting took place in 2025, covering the Supreme Court and a significant portion of the Judiciary. Faced with a sprawling list of pre-selected candidates, only 13 percent of eligible citizens casted a vote.³ Parties were barred from campaigning but the distribution of voting guides by members of the ruling coalition was documented, and most candidates that appeared in them were elected.⁴

Rather than directly addressing shortcomings of the old judicial system, the reform created political incentives that give rise to additional concerns. These include:

The explicit expectation of judges prioritizing the views of their constituencies – including political constituencies – which may override the need for impartiality.
An increased role for multiple stakeholders – including, potentially, non-state actors – in the nomination and election of judicial candidates.
The end of a professional career path into a judgeship and the possibility of inexperienced, unqualified or overtly political individuals being elected.

The judicial reform makes judges responsive to both electoral incentives and the constitutional mandate of the rule of law, thereby creating a more elastic basis for judicial decision-making.

Even President Sheinbaum, who continues to firmly back the reform, has implicitly acknowledged shortcomings. She recently proposed a set of adjustments to the reform that were swiftly adopted by Congress. These include pushing back the second electoral cycle from 2027 to 2028, creating a Coordinating Committee to oversee the adequacy of the candidates nominated (for instance, via exams) and reducing the number of potential candidates to simplify the voting process.⁵

Perceptions of reduced judicial independence and reliability of court outcomes may shift how stakeholders seek to resolve disputes. Companies and other actors may increasingly turn to political channels to either influence or circumvent judicial proceedings. At the same time, arbitration may become a more attractive and practical alternative. A similar dynamic may emerge in the regulatory sphere, where recent reforms have placed agencies under varying degrees of political control, further contributing to the politicization of dispute resolution.⁶

Increased Pressure From the United States

The Government of the United States is closely monitoring how Mexico’s judicial reform may affect judicial predictability and impartiality.⁷ This scrutiny comes as U.S. national security policy has framed organized crime operating in Mexico and across the Americas as a direct security threat. Certain cartels have been designated as Foreign Terrorist Organizations (“FTOs”), expanding the range of U.S. legal and enforcement tools available to their authorities, including in cross-border investigations and actions – coordinated or unilateral.⁸

Bilateral security cooperation expanded and Mexico moved to address Washington’s concerns. Yet, tension has dramatically escalated following a U.S. extradition request of Sinaloa state officials, including the then-Governor.⁹ Faced with decreasing public support for rule of law and anti-corruption policies,¹⁰ President Sheinbaum responded with calls to protect national sovereignty.¹¹ This, too, has an impact on the risks impacting companies operating in Mexico, particularly in sectors such as logistics and ports, mining, chemicals and strategic infrastructure. The same is true for finance, where FinCEN and other U.S. regulators have already shown a willingness to take unprecedented unilateral action.¹²

Implications on Business Risk Analysis and Mitigation

Industry- and project-specific risk assessments, as well as stakeholder mapping and analysis, must be central for those looking to capitalize on opportunities in the world’s thirteenth largest economy.

Specific implications include:

Stakeholder analyses must cover not only the institutional landscape, but an assessment of the substantive autonomy of individual players. Traditional roles remain (e.g., regulators regulate, judges adjudicate), but behavior could become less predictable.
Multiple stakeholder incentives must be assumed to be at play around major milestones. All issues that reach the public arena may be reframed politically or strategically litigated.
Judicial and political processes remain distinct. Yet, the intersections between the two have undoubtedly grown.
Disputes that enter a judicial lane may face a growing list of actors, rather than a limited one. Settlement pathways may multiply, even as narratives harden.
Addressing corporate concerns that reach public discussion is more complex.
Procedural issues can be converted into contests over legality, sovereignty or public interest by factions, local brokers or politically connected actors.

The New Normal for Corporates

Few private sector actors are structurally prepared for this scenario. Companies have been rightly focused on macro-level risk analysis, and on developing strong working relationships with stakeholders with direct ties to their business footprint. Irritants have been ideally managed at the systemic or sectoral level, for instance via business chambers.

This may now prove insufficient. Micro-level risk needs to be monitored. When de-escalating becomes more difficult, and costly, prevention is key. A Know Your Risks (“KYR”) and Know Your Stakeholders (“KYS”) approach is essential, covering risks at the macro and micro levels, as well as both structural stakeholders (e.g., regulators, local governments) and situational stakeholders that are relevant to specific milestones (e.g. judicial slates, party operators, activist networks, security-linked interlocutors).

In practice, this can look as follows across the business cycle:

Project and Transaction Review. Identify formal decision nodes (e.g., for permits, environmental reviews, land access, compliance review). Contrast and compare with informal influence networks. Apply scenario analysis to identify escalation triggers and cost curves.
Front-End Discipline and Preventive Controls. Carry out rigorous context-specific pre-investment diligence, tighten escalation protocols, adopt stronger documentation standards across permitting, compliance and community engagement. Also, adapt contract structures including a robust arbitration architecture, stabilization provisions, enhanced step-in rights and explicit political and security contingency covenants.
Stakeholder Engagement. With a broader lens, step in earlier and be more adaptive, beyond line regulators to legislative caucuses, local authorities, communities and issue-specific intermediaries, without necessarily being front-and-center on every issue. Ensure all engagements are lawful, ethical and well-documented.
Enterprise-Level Integration. Unify political risk, legal, compliance, regulatory intelligence and communications into a single monitoring function. Ensure board-level reporting on judicial implementation milestones, subnational hotspots, legal precedents, sovereignty rhetoric and bilateral escalation signals.

Operating in Mexico is not business as usual, but the business environment has certainly not collapsed and opportunities remain promising in multiple sectors. Corporates are facing a differentiated and escalation-prone risk landscape. The operative question is not whether formal checks and balances exist, but whether they function predictably enough across specific sectors and cases to allow for low-cost correction of missteps.

The answer is increasingly conditional. Risk is best priced by sector, state, counterparty and politicization exposure — not as a uniform country variable. The strategic focus has shifted decisively toward prevention, careful sequencing of actions and a more granular understanding of risks and stakeholders.

Footnotes:

1: “Decreto por el que se reforman, adicionan y derogan diversas disposiciones de la Constitución Política de los Estados Unidos Mexicanos, en materia de reforma del Poder Judicial” [Decree Amending Various Provisions of the Political Constitution of the United Mexican States Regarding Judicial Reform], Diario Oficial de la Federación [DOF] (Sept. 15, 2024) (Mex.).

2: Presidencia de la República, “Iniciativa del Ejecutivo Federal con Proyecto de Decreto por el que se reforman, adicionan y derogan diversas disposiciones de la Constitución Política de los Estados Unidos Mexicanos, en materia de reforma del Poder Judicial” [Federal Executive Initiative with Draft Decree Amending Various Provisions of the Political Constitution of the United Mexican States Regarding Judicial Reform], Gaceta Parlamentaria, No. 6457-15 (Feb. 5, 2024) (Mex.).

3: Instituto Nacional Electoral (INE), “Porcentaje de participación ciudadana en la Jornada Electoral del PEEPJF 2024-2025 está entre el 12.57 % y el 13.32 %” [Citizen Participation Rate in the 2024–2025 Federal Judicial Election Process Was Between 12.57% and 13.32%], Central Electoral (June 2, 2025).

4: Raziel, Zedryk, “Mexico ushers in a new era for its justice system with a judiciary elected by popular vote,” El Pais (Sept. 2, 2025).

5: Jimenez, Elia Castillo, “Sheinbaum entrega al Congreso su propuesta de reforma a la elección judicial,” El Pais (May 20, 2026).

6: AP News, “Mexico to eliminate 7 independent regulatory, oversight agencies What does it mean for the future?” (Nov. 29, 2024).

7: See, for instance: U.S. Department of State, 2025 Investment Climate Statements: Mexico (2025).

8: Further analysis on this issue can be found here: Morales, Isaac, Pablo Zarate & Damian Martinez Taguena, “Corporate Impact of FinCEN’s Recent Orders and FTO Designations in Mexico,” FTI Consulting, Inc. (July 9, 2025).

9: Press Release, U.S. Att’y’s Off., S. Dist. of N.Y., “Governor Of Sinaloa And Nine Other Current And Former Mexican Officials Charged With Drug Trafficking And Weapons Offenses” (Apr. 29, 2026).

10: See, for instance: Moreno, Alejandro, “Aprobación a Claudia Sheinbaum alcanza 69% en mayo: Encuesta EF,” El Financiero (June 1, 2026).

11: Cortes, Raul, “Mexico’s Sheinbaum escalates rhetoric against US, blames far-right ‘offensive,’” Reuters (June 2, 2026).

12: Financial Crimes Enforcement Network, Treasury Issues Unprecedented Orders under Powerful New Authority to Counter Fentanyl (June 25, 2025).