Mexico's President Consolidates Power, Affecting Nearshoring
Mexican President Claudia Sheinbaum is consolidating political power, a move that could create both stability and abrupt policy changes for nearshoring operations. Her administration's efforts to centralize authority may impact manufacturing investment, labor laws, and the overall regulatory environment for foreign companies operating in the country.
- A controversial judicial reform is advancing, which includes the popular election of judges and a reduction in the number of Supreme Court justices from 11 to 9. Critics are concerned this could undermine judicial independence and create an unpredictable legal environment for foreign investors. The U.S. Ambassador to Mexico has warned that the reform could threaten the trade relationship by eroding investor confidence in Mexico's legal framework. - This judicial overhaul is part of a broader package of constitutional changes known as "Plan C," which also aims to dissolve independent regulatory bodies. This could impact key sectors for manufacturers by folding regulatory commissions for energy, telecommunications, and economic competition into the executive branch. - In response to investor uncertainty, President Sheinbaum's administration has launched "Plan Mexico," an economic strategy to attract investment by reducing imports from Asia and strengthening North American production. The plan includes a 30 billion peso (about $1.4 billion) incentive package for companies investing in new fixed assets and workforce training to support nearshoring. - Despite political uncertainty, foreign direct investment (FDI) remains strong, reaching a record $40.9 billion in the first three quarters of 2025, a 14.5% increase from the same period in 2024. The manufacturing sector is the largest recipient of this FDI, attracting $15.18 billion (37.1% of the total) during this period. - The automotive sector continues to see significant investment, with approximately $2.96 billion in new projects between October 2024 and June 2025. Notable investments include expansions by Toyota, Ford, Giant Motors for electric vehicle assembly, and Kia. Additionally, several pharmaceutical companies, including Boehringer Ingelheim, Bayer, and AstraZeneca, have recently announced combined investments of over 12 billion pesos (about $656.8 million). - The Sheinbaum administration has set an ambitious goal of generating 45-50% of the country's energy from renewable sources by 2030, a significant increase from the current 15%. This plan includes a proposed $13.6 billion for new electricity infrastructure, including solar and wind projects, and could create opportunities for manufacturers with sustainability goals. - To address energy demands from the growing manufacturing sector, the government is also prioritizing energy efficiency. New regulations have been introduced for industrial equipment such as air-conditioning systems and electric motors to improve energy performance. - The upcoming 2026 review of the United States-Mexico-Canada Agreement (USMCA) is a key event to monitor. The passage of "Plan C" and the judicial reforms could create a more contentious review process, with Canada potentially aligning more closely with the United States on concerns about Mexico's compliance with the agreement.
