MEXICO: An Introduction to General Business Law: Monterrey

Business Development in Monterrey

Monterrey, along with its metropolitan area, stands out in the northern region of the country as the capital of one of the most important states—Nuevo León. It boasts extensive public infrastructure, high-quality educational institutions, top-tier medical services, and many other attributes that have solidified its position as one of the most attractive locations for the establishment of prestigious national and international companies.

In the post-pandemic international context, political, economic, and social circumstances have necessitated the relocation of a large number of companies, primarily American, to a location closer to their home territory. This shift aims to prevent supply chain disruptions and the inability to market products, as occurred in 2019, by moving the production of inputs and goods from remote locations to nearer destinations.

This scenario prompted the substitution of offshoring with nearshoring, leading companies to replace those remote locations with ones closer to the markets they are involved in. Mexico has become an exceptionally attractive option not only because of its proximity to the United States but also due to the social, cultural, and political conditions that have prevailed for decades. These factors have enabled foreign investment to take advantage of Mexico's skilled labour force, international trade experience, and generally accessible production costs.

According to figures from Mexico's Ministry of Economy, in the first quarter of 2024, foreign direct investment in Mexico reached twenty thousand three hundred and thirteen million dollars, a figure that was nine percent higher than the same period in 2023, reaching a new historic maximum. This reflects a constant increase, placing Nuevo León as the second state with the most foreign direct investment in the country, particularly in the manufacturing, financial services, and transportation sectors.

Federal Elections and Judicial Reform

This year, general elections were held in Mexico, in which, for the first time, a woman was elected as President, achieving a historic vote of nearly 60% and consolidating the ruling party's power for another six years. Additionally, this political party secured a significant number of seats in the Federal Congress, enabling it to reform federal laws and even the Constitution, given that it also won the majority of the state governorships. This will allow for modifications that the current President was unable to achieve due to opposition from other parties in Congress.

The newly elected deputies and senators will take office on 1 September 2024, allowing the new Congress—controlled by the ruling party—to approve, within a short period, the reform initiatives that the current President has not been able to pass. The President-elect will be sworn in on 1st October.

One of the most significant and widely discussed initiatives in forums is the proposed extensive reform of the Federal Judiciary. Among other things, this reform, which will be discussed and very likely approved by the new Congress taking office on 1st September 2024, seeks:

(i) a new composition of the Supreme Court of Justice of the Nation, focusing on efficiency, austerity, and transparency;

(ii) the popular election of Ministers, Magistrates, and Judges, with the aim of giving democratic legitimacy to those who administer justice;

(iii) the replacement of the Federal Judiciary Council (the body responsible for overseeing and administering the Federal Judiciary); and

(iv) the establishment of new procedural rules, setting limits for the resolution of certain matters, particularly those of a fiscal and criminal nature.

This proposal has generated some anxiety as, although there are precedents in Mexican history for the replacement of Supreme Court Ministers, there is no record of such an ambitious reform as the one that seeks the popular election of federal judges initially, and later at the state level, which would mean leaving the designation of those who administer justice in the hands of the electorate.

Alternative Dispute Resolution Mechanisms

In such a context, it is even more advisable for investors to seek legal advice to protect their investments in case they need to resolve a dispute with a private party or even with the government.

Mexico has a solid legal framework and professional experience in commercial arbitration procedures, which are extensively regulated in the Mexican Commercial Code and enjoy constitutional protection, being recognised as an alternative dispute resolution method under Article 17 of the Constitution.

Even the new General Law of Alternative Dispute Resolution Mechanisms, published in the Official Gazette of the Federation on 26 January 2024, aims to offer more agile and economical alternatives for conflict resolution outside the traditional judicial system.

This law regulates procedures such as mediation, conciliation, negotiation, and arbitration, with the goal of easing the pressure on the judicial system and promoting a culture of peaceful conflict resolution.

Additionally, Mexico is a party to several international treaties that recognise the right to access alternative dispute resolution mechanisms. Some of the most relevant are the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958); the North American Free Trade Agreement (NAFTA) and its successor, the United States-Mexico-Canada Agreement (USMCA); and the Inter-American Convention on International Commercial Arbitration (1975), all of which reflect Mexico's commitment to promoting and facilitating access to alternative dispute resolution mechanisms in the international arena.

Conclusion

In conclusion, Monterrey has established itself as a hub for business and investment, thanks to its robust infrastructure, highly skilled workforce, and strategic proximity to the United States. The region has leveraged the advantages of nearshoring, becoming an ideal destination for companies seeking to optimise their supply chains in an ever-changing global economic context. These factors have enabled Monterrey and its metropolitan area to stand out as one of the regions with the highest foreign direct investment in Mexico.

However, this economic development also takes place within a dynamic political and social landscape, where federal-level reforms, including the proposed significant changes to the judiciary, could impact the country's legal stability and business environment. The uncertainty generated by these reforms underscores the importance of having a clear regulatory framework and alternative dispute resolution mechanisms to protect investments and ensure legal security in a changing environment.

Finally, the strengthening of alternative dispute resolution mechanisms, recognised both in national legislation and in international treaties, is a key step towards ensuring a more agile and reliable business environment in Mexico. These measures not only reflect the country's commitment to modernisation and efficiency but also provide investors with the necessary certainty to operate in an increasingly competitive and complex global context.