Contributed By Ocampo 1890 S. C.
Mexico is Facing Important Changes
On 1 July 2018, the people of Mexico voted for the left-wing Morena party candidate, Andres Manuel Lopez Obrador, who won the elections with 53% of the vote. Along with the president, Morena won a relative majority in Congress. Obrador assumed the presidency on 1 December 2018.
Morena is a radical left-wing party that has openly accepted the Venezuela regime as successful. Mexico is facing what Morena and Obrador have defined as the Fourth Transformation (the first being Mexican independency; the second the Reformation Laws of 1861; and the third the Mexican Revolution).
One of Obrador’s main ambitions is to fight corruption by creating specific laws and an anti-corruption agency. This is an anticipated and much-needed policy, but it is not yet clear how it will be implemented.
Obrador intends to challenge all of the current administration’s policies. As elected President, he has said he will cancel the construction of Mexico’s New International Airport, claiming it was conceived amidst several acts of corruption. Instead, his proposal is to overhaul two airports surrounding Mexico City – Santa Lucía and Toluca – and to optimise the existing airport. However, there are mixed messages, as he is inviting the same contractors to participate in the overhaul of these airports, which has already impacted both his credibility and that of his administration.
Mexico, the US and Canada recently signed the T-MEC (USMCA) treaty, having received the elected president’s approval of its terms and conditions. Financial services will continue to be regulated as they have been by NAFTA to date.
However, there is uncertainty from investors regarding Obrador’s period of rule.
Currently, the Mexican insurance industry is one of the strongest in the world, as insurers must apply the Solvency II model to their finances. Corporate governance is also mandatory.
Obrador’s choice of appointment of a new president of the Insurance and Surety National Commission – a person with no experience in insurance matters (although apparently with knowledge of the administration of surety and bonds) – has caused uncertainty, being as he will the first unexperienced president heading the Commission for at least three decades.
It is expected that some of the top directors will leave the Commission, allowing new and inexperienced persons to take their place. A long learning curve will certainly impact the insurance sector.
Such uncertainty brings with it a good opportunity for insurance and surety companies to write insurance, surety and bonds to cover damages caused by breach of contracts or damages and prejudices arising from such breaches. There are other financial instruments under development to assist the industry.
Mexico will need to incorporate new laws to improve e-commerce, mainly in the financial field. Insurtech is now being analysed by the industry and the Insurance and Surety Commission is waiting for the industry to propose new business models before imposing regulations. The changes Mexico faces present a good opportunity to begin a new type of insurance-selling model, relying on the blockchain.
Regarding the oil and energy industry, the current administration has modernised the legal framework to allow private and foreign competitors to participate in oil extraction, but maintaining state control. In this regard, Obrador has suggested overturning such developments, and implementing the regulation Mexico had in the 1980s, meaning a fully State-controlled industry, forbidding any participation from foreign competitors. He is also proposing to build new refineries, rather than developing the renewables industry.
Mexico’s legal system allow for the “Amparo” trial to challenge either judicial or administrative resolutions that affect citizens’ constitutional fundamental and human rights. Amparo is intended to limit the State’s power over citizens and up to now has been a counterweight of legislative power.
Moreover, the nation’s Supreme Court has been very proactive in creating new measures such as punitive damages. In fact, since 2011 when the Constitution was amended to elevate human rights to a constitutional range, the courts have begun resolving cases from the consumer’s human rights perspective, regarding consuming goods and services of good quality. In that sense, the Supreme Court has said it is trying to implement a “case law” system, creating criteria to be followed by the Federal and local courts.
In conclusion, Mexico faces a period of great change, likely to impact several industries. It must be ready to act in consequence, using experts in their fields to defend their rights.