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By KELIN DILLON

According to new reports from U.S. newspaper the Wall Street Journal (WSJ) and Mexico’s National Auto Parts Industry (INA), many global firms who were seeking to invest and expand into Mexico have now put their plans on pause due to the potential economic and regulatory impact of President Andrés Manuel López Obrador’s (AMLO) controversial judicial reform.

The reform, which proposes the popular election of Mexico’s federal judges and magistrates, passed through the Chamber of Deputies last week and is expected to be voted on in the Mexican Senate on Tuesday, Sep. 7.

The WSJ report revealed that U.S. enterprises alone have suspended approximately $35 billion in economic investment in Mexico due to the proposed changes to the judiciary.

“Business representatives and advisers estimate that foreign companies 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 related to reform and the U.S. election,” said the WSJ. “That figure nearly equals what Mexico attracts in foreign direct investment in an average year. Lately, most of that has been from companies reinvesting their profits abroad.”

The paper went on to say that some previous proposals made by AMLO’s National Regeneration Movement (Morena), such as the federal executive’s similarly contentious electricity reform that purportedly violated the United States-Mexico-Canada Agreement (USMCA), could be approved by popularly elected judges.

“Costly international arbitrations over investment rights are also likely to increase as companies try to avoid Mexican courts. Lending to companies in Mexico would also be affected by the uncertainty, according to bankers,” added the WSJ. 

Likewise, INA officials said that the potential impact of the judicial reform has caused global automotive firms to pull back from making major investments in the country.