Mexico

Market overview

Nearing the end of his time in office, President Andrés Manuel López Obrador – better known as AMLO – has failed to foster a positive relationship with...

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Nearing the end of his time in office, President Andrés Manuel López Obrador – better known as AMLO – has failed to foster a positive relationship with Mexico’s business community. His nationalist approach, particularly towards the energy sector, has triggered a foreign and private investment drought, with industries now heavily underfunded.

AMLO has repeatedly shown a determined commitment to the public management of oil and gas and power assets. In April 2022, he made a concerted effort to change the constitution and implement a radical energy reform bill that would have handed state-owned electricity group CFE a majority share of the market. The private sector, opposition politicians and the US government were naturally spooked by the bill, which was defeated in the Mexican congress. During his tenure, the president has favoured investment in fossil fuels, greenlighting the construction of a multibillion-dollar refinery for state-owned oil company Pemex. He also approved amendments to Mexico’s electricity law that grants CFE priority over private power players.

Despite falling short of a two-thirds majority in the midterm elections in 2021, it is not all unwelcome news for AMLO’s leftist National Regeneration Movement (MORENA). Midway through 2022, the ruling party won four of six state elections, strengthening the president’s grasp on power ahead of the 2024 presidential election. Since he took office, AMLO’s critics have feared that he would try to stay in power beyond the six-year term limit. In 2022, those fears came to the fore when the president proposed an overhauling of Mexico’s electoral system that would give his party greater control over election processes.

The threat of corruption continues to loom large over Mexico, with a few high-profile cases in the past few years involving state-owned bodies and public agencies, doing little to quell investor uncertainty.

Despite sluggish economic growth and political uncertainty in Mexico, lawyers can take comfort in the success of the two-year-old United States–Mexico–Canada Agreement (USMCA). The accord has helped trade bounce back to pre-pandemic levels and has addressed more trade-related disputes than its predecessor, the North American Free Trade Agreement (NAFTA).

Mexico’s powerful neighbour has undoubtedly also shaped the country’s legal market. On top of a healthy list of US clients and financial institutions on local firms’ books, their lawyers have benefitted from close relations with US law firms; many have worked as foreign associates and studied in top US schools. Establishments in this chapter are therefore well stocked with talented, well-educated lawyers who clearly understand international companies’ needs.

The US influence can be seen on a wider scale too. US firms have entered Mexico in a variety of ways – absorbing well-established local names, poaching teams and making lateral hires. No new US players have entered Mexico in several years – perhaps indicating how saturated this market is already. Nevertheless, the 2021 merger between Holland & Knight LLP and Thompson & Knight LLP created a sizeable team with a presence in two Mexican cities.

The foreign presence is not limited to US firms. Leading Spanish names now consider Mexico a core component of their regional expansion strategies, which have largely centred around the Pacific Alliance countries so far. Garrigues and Cuatrecasas both have offices in Mexico City.

Deal flow remains at a healthy level, thanks in part to the relatively cheap peso. Real estate and tourism are thriving industries as travel quickly resumed following the end of the pandemic. Those investors and banks looking for opportunities in Mexico can count on a large pool of talented lawyers to assist on complex M&A, private equity and finance transactions.

The country’s volatility has shaped the legal community, which is home to a variety of business models, including several full-service titans and a handful of leading transactional firms. Among the market-leading full-service firms, deeper specialisation and a wider range of practice areas are now expected. Mexico’s top-level firms now boast broad service offerings far beyond their transactional core.

These well-rounded firms – more often than not – have additional offices outside Mexico City. Some outfits have outposts in industrial hubs such as Querétaro, alongside the more traditional bases of Mexico City and Monterrey. A smaller number of firms also have a presence in Guadalajara, Juárez, Tijuana and Guanajuato. Baker McKenzie (Mexico) has the widest national presence with five offices. Beyond Mexico, Nader, Hayaux & Goebel is unique in having a name partner based in London, a means to reach the City’s law firms and financial institutions. In addition, Goodrich, Riquelme y Asociados has an office in Paris.

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