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MEXICO: HSBC Acknowledge Further Reform Risks Ahead

MEXICO
EM BulletMexicoBulletGlobalEmerging Market NewsRegion
  • HSBC notes that markets, US officials, and the broad business community have expressed concerns about Mexico’s judicial reform due to uncertainty and potential erosion of the institutional and legal frameworks, as well as the impact on business sentiment.
  • While HSBC do not envision significant changes to the reform, indications are that the execution of the reform will be made in such a way that it complies and adheres with the USMCA. This stems from their view that the incoming administration will continue to prioritize the trade relationship with the US.
  • Looking ahead, HSBC believe the main question will be on the next administration's approach to policy and business matters, which will prove key to set the tone ahead. A more moderate approach would likely be well received by markets. Tangible actions, such as a credible fiscal budget that aims to reduce deficits would contribute to improve market sentiment.
  • Yet, HSBC believe some pending reforms are still a downside risk. In particular, they believe potential changes to institutionally independent bodies could harm investor sentiment further.
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  • HSBC notes that markets, US officials, and the broad business community have expressed concerns about Mexico’s judicial reform due to uncertainty and potential erosion of the institutional and legal frameworks, as well as the impact on business sentiment.
  • While HSBC do not envision significant changes to the reform, indications are that the execution of the reform will be made in such a way that it complies and adheres with the USMCA. This stems from their view that the incoming administration will continue to prioritize the trade relationship with the US.
  • Looking ahead, HSBC believe the main question will be on the next administration's approach to policy and business matters, which will prove key to set the tone ahead. A more moderate approach would likely be well received by markets. Tangible actions, such as a credible fiscal budget that aims to reduce deficits would contribute to improve market sentiment.
  • Yet, HSBC believe some pending reforms are still a downside risk. In particular, they believe potential changes to institutionally independent bodies could harm investor sentiment further.