MEXICO: An Introduction to Bankruptcy/Restructuring

As we move through 2025, the global landscape is becoming more complex, posing particular challenges – and opportunities – for businesses operating across North America.

Mexico, in particular, is navigating a period marked by heightened uncertainty on multiple fronts, including economic pressures, political transitions, rising interest rates and evolving patterns of global trade.

Growth expectations for the Mexican economy have been tempered, largely driven by concerns surrounding potential changes to trade policies, the anticipated review of the United States-Mexico-Canada Agreement (USMCA) and broader uncertainties tied to the performance of the US economy.

Following the recent elections, Mexico is entering a period of institutional transition, particularly within the judiciary. The proposed constitutional reforms affecting the judicial system, and the perceived erosion of regulatory independence, have deepened concerns about legal certainty and the effective enforcement of the rule of law. These shifts have raised red flags among foreign investors, potentially impacting long-term confidence in the country’s institutional framework.

In this setting, the relationship between the new governments in both Mexico and the United States will be pivotal. Without a co-ordinated and forward-looking approach, the lack of alignment could translate into setbacks for all involved. A stable, rules-based environment is essential to fostering regional competitiveness and sustained investment.

Last year, we believed that Mexico would have an invaluable opportunity with nearshoring. allowing it to capture unprecedented investment that could accelerate economic growth and boost the country’s prospects. Now, the nearshoring-related optimism is tempered by uncertainty around renegotiations of the USMCA, domestic governance and global macroeconomic volatility. These are the main concerns of business. The situation is still evolving, and companies will need to stay alert to navigate this increasingly intricate environment.

Despite these challenges, we see some positive signs internally, as the current administration is promoting investment through the Plan Mexico initiative, a comprehensive project focused on strengthening the economy and promoting regional development within Mexico. The plan proposes ambitious goals requiring a clear roadmap, which is still being defined.

Meanwhile, businesses in affected sectors and industries will have to continue evaluating their financial liquidity and define restructuring plans, or even opt for in-court insolvency proceedings. Companies will need to identify inefficiencies, suspend non-essential operations, optimise activities, and negotiate amendments to their business plans and contractual terms in response to the current economic and business scenario. Companies that proactively anticipate these risks, identify new opportunities and adjust their business plans accordingly will have, notwithstanding the challenges and political concerns, opportunities for stability and even growth and expansion.

Insolvency proceedings in Mexico remain underused by debtors and are far less common than in other jurisdictions, as debtors are inexperienced and fearful when it comes to facing insolvency situations. Likewise, insolvency and bankruptcy play very different roles for large and sophisticated corporations compared to small businesses. Big players may be able to successfully turn to insolvency or bankruptcy for protection, while small ones often see this as a last resort. Insolvency protection is an expensive and complex proposition for small debtors. Furthermore, sophisticated creditors may even choose, if possible, to commence proceedings in US courts (Chapter 11 proceedings) rather than Mexican ones.

However, it is our opinion that the insolvency culture in Mexico has changed in a number of ways and significantly improved in the aftermath of the pandemic. Debtors and creditors gained experience in insolvency matters through their responses to corporate crises during the pandemic, although it will still be some time before companies come to consider insolvency processes as a corporate rescue. We have also seen that creditors have become, in many cases, more open to negotiations after seeing and experiencing the hardships of some recent insolvency proceedings. These experiences seem to have forced a re-evaluation of the appeal of out-of-court alternatives and restructuring prior to going into free-fall in-court proceedings, unless a pre-packed petition is feasible.

The creation of the first two courts specialised in insolvency and commercial bankruptcy proceedings has brought greater certainty, clarity and consistency to Mexico’s insolvency system. There is still a long road ahead to reach the full potential of insolvency law, but we continue to see changes that address the current system´s limitations and provide greater legal certainty and relief to both debtors and creditors.

Global insolvencies are expected to increase in 2026. Various factors have resulted in relatively high insolvency levels in most markets. Looking ahead to 2026, the insolvency landscape in Mexico will likely start to see an increase in proceedings due to the current economic and political situation and the tighter financing conditions, which will become a significant challenge for those businesses that increased their debt during or after the pandemic. In recent years, the rebound in business insolvencies has picked up speed.

According to the latest report and statistics published by the Federal Institute of Experts in Insolvency Proceedings (Instituto Federal de Especialistas en Concursos Mercantiles; IFECOM), as of November 2024 (and since the enactment of the Insolvency Law in Mexico), there have been 1,057 insolvency in-court proceedings in Mexico.

We expect that 2026 is likely to remain challenging for businesses, and that debt defaults will continue building up and banks will keep strengthening their provisions for bad debt and increase restrictions on new credit. External shocks will continue to have a negative impact on the Mexican economy. The global economy will suffer due to international conflict, supply-chain disruption, economic slowdowns in key economies and high inflation and interest rates.

We strongly believe that, more than ever, the Mexican government must assist by:

• continuing to strengthen the insolvency regime;
• developing prompt mechanisms and an efficient and specialised judicial process to mitigate some of the current conditions; and
• providing businesses with an opportunity for survival.

Mexico should focus on improving its investment environment and implementing major public policy and rule-of-law efforts to get the better of global market fragmentation. It should assist businesses in thriving and surviving at a time when there will be numerous opportunities for insolvency and restructuring practice.

In the near term, insolvency lawyers and turnaround specialists will be focusing on mitigating the relevant external impacts, finances and disputes. Advisers know they will have to provide, more than ever, creative and agile strategies that allow clients to adopt responsive actions to present and future threats.