AMLO’s upcoming regulator bonfire poses stark risks for Sheinbaum’s economy.

AMLO hands over Morena party baton to Claudia Sheinbaum in Mexico City, 2023. Photo credit: ZUMA Press.

President López-Obrador's (AMLO) Morena party introduced 18 constitutional reforms to Mexico's Congress on Thursday. They aim to reshape Mexico before AMLO leaves office on October 1, and secure his so-called "Fourth Transformation" (4T). By Thursday's close, all four discussed on the day had passed.

The sheer volume of votes by August 20 makes it difficult to scrutinize each one. This poses challenges for Mexico’s democracy. For Morena supporters, it also undermines the reforms themselves. Two critical proposals will dissolve Mexico’s autonomous regulators and enact controversial judicial reforms. Today we're focusing on the regulators, teed up for a vote on August 15.

The reforms target the National Institute for Transparency Access to Information and Personal Data Protection (INAI), the National Hydrocarbons Commissions (CNH), the National Statistic Agency (COFECE), the Federal Telecoms Institute (IFT), and the National Electoral Institute (INE). These bodies are crucial for maintaining the integrity, protection, and fair use of official data. They have strong international reputations. Dissolving them could undermine Mexico’s global economic competitiveness. It will also damage public trust over time.

The INAI is responsible for overseeing government information and protecting personal data. It faces being folded into a cabinet-level agency. Doing so risks damaging public and investor confidence in official data. Mexico has, under both AMLO and his predecessor Enrique Peña Nieto (EPN), used spyware against critics. Concerns about privacy and safety for civil society activists are valid.

Bringing the INE under cabinet control could lead to electoral interference by future administrations. Fears of this are heightened this week, considering Venezuela's contested election which the Carter Center called “not credible” and which AMLO was notably muted about. The CNH, which manages Mexico’s hydrocarbon data and bidding rounds, also occupies a vital position. AMLO’s rollback of EPN’s energy reforms has already shaken global confidence in Mexico’s energy market. Merging CNH into the Secretary of Energy (SENER) could further deter foreign investors. This would hobble Sheinbaum’s green energy ambitions before she even takes office. Similarly, COFECE regulates market competition. Its work has been praised this year by the US Department of Justice for its robust antitrust enforcement.

These regulators are essential for Mexico’s economic competitiveness and stability. As US and China decouple, Mexico aims to benefit from nearshoring. It hasn’t yet. AMLO’s actions suggest he thinks the world has no choice but to invest in Mexico. He might think President Biden's reluctance to criticise his plans indicate American acquiescence. But investors have alternatives. And Biden might have had more pressing items on his agenda. A future Harris or Trump presidency may well take notice once these reforms become real.

Sheinbaum has announced ambitious infrastructure projects. She supports the reforms passed in committee this week. They include state pension increases, above-inflation minimum wage hikes, and a large-scale housing program. These may be good ideas. They have cross-party support. But they're expensive. Mexico lacks the necessary tax revenue to fund them. Any savings made by dissolving these agencies won’t begin to cover these new costs. To make them work, Sheinbaum needs investor confidence. Dismantling respected, independent regulators undermines her pitch to investors.

Let’s be honest. Doing this now, in the final weeks of his presidency, is all about AMLO securing his 4T. It also, for AMLO, conveniently narrows Sheinbaum’s ability to shift priorities once in office. Co-opting the regulators might feel like a win to the ever-proud AMLO. He's battled them since he won the presidency. But it will undermine Sheinbaum's capacity to enact these new social reforms well.

AMLO could have prioritised his social reforms and shelved his battle with regulators. By not doing so, he’s set up unnecessary hurdles for his successor to clear. He’s also threatened the success of his own legacy programs. Time will tell how deftly Sheinbaum manages these challenges. She might succeed. Or in the future, we might look back on August 2024 as the month AMLO’s hubris tanked the 4T.