MEXICO CITY (Reuters) - Mexico's sweeping judicial overhaul passed in the Senate earlier on Wednesday could have significant implications for the nation's sovereign credit rating, Moody's (NYSE:MCO) Ratings warned in a report.
The reform, which stipulates that judges be elected by popular vote, will erode checks and balances and could undermine Mexico's economic and fiscal strength, Moody's cautioned.
Outgoing President Andres Manuel Lopez Obrador, who has often clashed with top judges, has repeatedly argued that the reform is vital to restore integrity to Mexico's judiciary and ensure it serves the people rather than elite and criminal interests.
However, trade allies such as the United States and Canada have already expressed concern regarding the measure.
The reform runs the risk of being challenged by both countries, particularly under the trilateral USMCA trade agreement, Moody's said.
Another reform proposed by Lopez Obrador, which would do away with a number of independent regulators, would make the nation's otherwise well-positioned infrastructure sector less attractive for private investment, the credit agency said.
Legal uncertainty will likely hit the sectors which most rely on concessions and large investments such as mining and telecommunications the hardest, Moody's added.