Unchallengeable Reforms: Mexico's Constitutional Overhaul Sparks Controversy

Mexico's Senate has approved a proposal to make constitutional reforms, including a contentious judicial overhaul, unchallengeable. Proponents argue it will combat judicial corruption, while critics fear investment uncertainty. The decision has impacted the peso negatively, reflecting concerns about potential sovereign credit rating cuts.

Mexico's Senate took a decisive step on Friday by approving a proposal that would render constitutional reforms "unchallengeable." This move aligns with the ruling party Morena and its allies' agenda to implement sweeping constitutional changes, among them a contentious judicial overhaul.

Last month, Congress endorsed a judicial reform proposing that all judges and magistrates be selected via popular vote. Proponents among the ruling lawmakers believe this approach is essential to eliminate corruption within the judiciary. However, this uncertainty has unsettled investors, leading to a depreciation of the local peso currency. Mexico's Supreme Court had already accepted a challenge to the reform earlier this month.

In response to the Senate's decision, Banco Base warned that the likelihood of downgrades to Mexico's sovereign credit rating is rising due to perceived deterioration in the country's institutional profile. On Friday, the peso weakened by approximately 0.40% against the U.S. dollar, a decline attributed by Monex analysts to "local political noise" and the looming U.S. presidential elections. The proposal now advances to Mexico's lower house, where the ruling bloc commands a substantial majority.

(With inputs from agencies.)