‘We Are Concerned’: Five Takeaways from a Top Mexican Lawyer

As more U.S. companies look to Mexico for nearshoring opportunities, the legal terrain beneath them is shifting fast. In a recent interview with Nearshore Americas, Carlos Vela-Treviño, a cybersecurity attorney and partner at Baker McKenzie in Mexico City, warned of mounting risks — from judicial instability and labor rigidity to sweeping surveillance reforms that could reshape how business is done.

Here are the top five takeaways from the conversation with Vela-Treviño:

Mexico’s Judicial System is Undergoing a Political Overhaul

Former President Andrés Manuel López Obrador made sweeping changes to the judicial system near the end of his six-year term, most notably of which introduced the direct election of judges. While on the surface the change could be considered a win for the people, Vela-Treviño said there are major concerns that those involved in the justice system have raised.

“More than 1,000 circuit courts were disbanded, the Supreme Court of Justice was disbanded, and the new judges have been elected,” he said. “Now, if someone has one or two years of experience and a law degree, that person qualifies to be on the Supreme Court.”

The changes, which López Obrador successfully implemented after two failed attempts, took place just months before his mentee and successor, Claudia Sheinbaum, took office as the first female president.

U.S. Companies are Being Advised to Avoid Mexican Courts

Due to the reduction in requirements on experience for judges, Vela-Treviño believes the courts could see some benefits, but likely for individuals and not nearshoring operations from the U.S.

Arbitration has long been preferred in settling labor disputes due to the amount of time it has historically taken Mexican courts, which Vela-Treviño described as “professional and very well educated,” to issue rulings.

With the shift to a less experienced judiciary, Vela-Treviño said many experts are expecting a court that rules more on the tenets of common sense as opposed to the intricate technicalities analyzed under the previous system. In theory, this could speed up outcomes, but also raises questions about the effectiveness of the future judiciary, Vela-Treviño said.

The Cost of Doing Business, but the Price is Right

Mexico is widely accepted to have a more protections for employees amid a work culture that values the presence of unions. Under Mexican law, there are narrow reasons that permit an employer to terminate a worker with cause, which still incurs a required severance of 12 days per for each year worked at the company.

For terminating an employee without cause, a minimum of three months’ salary must be paid along with a potential added payment of 20 days’ salary per year worked when the employee appeals to the Mexican government for reinstatement but is refused.

In the nearshore realm, Vela-Treviño said the vast majority of U.S. companies are aware of the requirement for severance pay and have already considered it to be a cost of doing business.

Mexico May Have Missed its Chance

While Vela-Treviño referred to Sheinbaum’s administration as more highly educated, he said it’s likely Mexico missed a major opportunity to better capitalize on the manufacturing nearshore industry due to AMLO’s nationalistic focus.

“Mexico lost a big opportunity with this judicial reform and with a number of laws that will be issued that are more protective,” Vela-Treviño said. “Mexico missed out on getting more integration with the U.S. and Canada.”

But China didn’t.

Vela-Treviño said that for the past two years he has noticed a significant increase in Chinese nationals starting businesses in Mexico.

“The (AMLO) administration was not very sophisticated and didn’t think on those terms,” he said. “They didn’t issue any benefits or incentives, and the Chinese companies were the ones entering the market.”

In contrast, Sheinbaum has often spoke of nearshoring in a positive manner and promotes the idea of U.S. companies investing in Mexico, though Vela-Treviño said it’s unclear if internal disagreements on policy could derail the initiative.

Nevertheless, in the business process outsourcing and IT realms of nearshoring, there has been continued growth at a rapid pace in the North American country.

Cybersecurity Concerns and a New “Patriot Act”

Mexico’s push to centralize digital identity and surveillance powers has raised new alarms among legal experts. A set of reforms backed by the current administration will create a biometric national ID tied to facial recognition, fingerprints and iris scans — all accessible to the military-controlled National Guard.

“We can see that forming this big surveillance state,” said Vela-Treviño. “The problem with this government is that we are not sure that they are going to invest in information security.”

The concern isn’t theoretical. Just two years ago, hackers known as Guacamaya breached the Ministry of Defense, leaking vast amounts of classified material.

“If the Ministry of Defense can be hacked, we can’t expect a lot from the National Population Ministry, which is the one that is going to have the database from all this biometric information,” he said.

He warned that without investment in robust cybersecurity infrastructure, the sweeping data collection effort could become a national liability.