Mexico's Judicial Reform Threatens Telecom and Tech Growth

Mexico's recent judicial reform could significantly impact the telecommunications and technology sectors, potentially undermining the stability and growth fostered by the 2013 reform. As the full effects of the reform are assessed, experts caution that a rollback in the technical specialization of regulation might deter investment and hinder technological progress.

Impact on the Telecommunications Sector

Since the 2013 reform, which established specialized courts and the Federal Telecommunications Institute (IFT), Mexico's telecommunications sector has seen notable growth. This reform reduced dispute resolution times and facilitated market entry for new players, promoting network expansion and competition.

However, the new judicial reform raises concerns about a return to a less specialized system. Lucía Ojeda, an economic competition expert and IFT counsel, told Expansion that the lack of judges with technical expertise could lead to delays and complications in resolving critical regulatory cases. The introduction of judges with political or business agendas might compromise the impartiality and efficiency of sector regulation.

Adolfo Cuevas, former IFT commissioner, warned that “the current regulatory framework in telecommunications has been crucial for ensuring companies' investments,” and the reform could discourage investment, slowing network expansion and the development of new services.

Javier Juárez, IFT Commissioner, emphasized the importance of maintaining the IFT’s institutional independence from political and economic interests, particularly in light of the United States-Mexico-Canada Free Trade Agreement (USMCA) provisions in Chapter 18.17. This article mandates that telecommunications regulatory bodies remain separate from public telecommunications service suppliers to ensure independence and impartiality.

Impact on the Technology Sector

The technology sector could also face severe consequences from the judicial reform. Effective and timely resolution of legal issues is crucial for the advancement of new technologies like artificial intelligence (AI). The potential lack of expertise among judges could limit Mexico’s ability to regulate and encourage technological innovation.

Alejandra Lagunes, former senator and founding member of the National Artificial Intelligence Alliance (ANIA), highlighted the critical moment for AI adoption. She predicts that AI will impact 50% of jobs by 2030 and 75% by 2050 but warns that regulation must address associated risks and ethics. Europe currently leads in this area.

“The true impact of the judicial reform on technology investments in Mexico will become clear in the medium to long term, following the release of secondary laws,” Lagunes said. “Uncertainty about the reform's implementation and the need for a clear regulatory framework are crucial factors Mexico must address to attract and retain technology investments, create jobs, and foster global collaboration.”

Government Response

Marcelo Ebrard, the incoming Minister of Economy, has downplayed concerns about the judicial reform’s impact on investment. In statements to Dinero e Imagen, Ebrard assured that the reform will not adversely affect Mexico’s investment climate. He believes the reformed Judicial Branch will perform better than the current one and that Mexico’s strong economic foundation and strategic position will continue to attract investment.

Ebrard noted that Mexico remains an attractive destination for international investors due to its robust manufacturing infrastructure and trade relations with the United States. Recent interest from European companies, such as Arsenale and Leonardo, reflects confidence in the Mexican market, according to Ebrard.

“What I anticipate is that we will handle this well. There is no reason to believe it will be done poorly; it will be done correctly, and we will maintain or even expand the level of investment in Mexico,” Ebrard reiterated. 

Before the judicial reform, Mexico enjoyed a relatively stable environment for investments in technology and telecommunications. The 2013 reform was a milestone, creating specialized courts and the IFT to enable more effective and technical sector regulation.

According to IDC, the IT market in Mexico was expected to grow by 8% in 2024, driven by nearshoring and digitalization in North America. The judicial reform, however, could impact this growth by introducing a less stable and predictable regulatory environment.

The recent judicial reform in Mexico aims to change the judge selection process, removing the requirement for a specialized technical profile. Instead of focusing on experience and knowledge, the reform proposes selecting judges potentially influenced by political interests.