Vestigo Volatility Score: 40%
President Andres Manuel Lopez Obrador passed legislation through congress to overhaul Mexico’s National Electoral Institute (Instituto Electoral Nacional, INE). The INE is responsible for overseeing Mexican elections and strengthening democratic processes. The legislation will cut the budget and staff numbers of the INE, reduce its independence as an institution, and limit penalties for political candidates that break election laws. Opponents view the legislation as part of a broader effort by Lopez Obrador to curtail democracy and allow his political party, the National Regeneration Movement (Movimiento Regeneracion Nacional, MORENA), to further solidify its dominant position. Hundreds of thousands of opponents to the legislation gathered in major cities across Mexico on February 26 to demand the legislation be retracted.
The INE overhaul allows for less political scrutiny and more opportunity for election corruption. This would ultimately reduce the scope for foreign investment in the long term, with companies unwilling and unable to navigate the increasing regression in Mexico’s rule of law.
Constraints to Consider
- Lopez Obrador maintains a 60 percent approval rating in Mexico, ensuring a mandate to attempt further revisions to democratic institutions in the coming year.
- Immediate impact from an INE overhaul on foreign investment will be limited. However, the measure adds to other controversial legislation, increasing long-term challenges for businesses.
How the INE legislation will impact election transparency
Funding cuts will see INE staff reduced by 85 percent. As the INE oversees votes nationally, the staff reduction guarantees more opportunities for electoral fraud. Mexico has been plagued by corruption in recent years. Transparency International ranks Mexico 126 of 180 countries in its Corruption Perception Index, a global indicator of public sector corruption. It also indicated that 44 percent of surveyed people thought corruption increased in the span of a year, according to its latest report. All of this points to a country in dire need of greater graft protections, not less.
Lopez Obrador would unlikely benefit personally from more relaxed election rules. Term limits theoretically restrict him from running for another term in office. His political party, however, could benefit immensely. Those already in power will be granted much more freedom to sway elections in their favor. MORENA currently dominates the ratio of legislators in the Senate and Chamber of Deputies compared to other political parties.
Corruption in Mexico
Lopez Obrador has alleged that the INE itself is corrupt and that the legislation will save Mexico USD 190 million annually. Note that it was the INE that approved Lopez Obrador’s election victory in 2018. Contrary to Lopez Obrador’s claims, curtailing the INE will open the door to further political malfeasance, while potential savings will be limited to about 0.1 percent of the federal budget.
Without election oversight, local officials will be granted a much larger platform to engage in bribery as they pursue and maintain power. It is a slippery slope that will also spill into Mexico’s security environment, allowing violent gangs increased opportunities to influence local government and gain a foothold in illicit activities. An erosion in the rule of law will ultimately make it more challenging for Mexico to attract foreign investment, with many western firms unwilling to navigate a semi-functioning democracy.
We base the percentage of our Volatility Score on the material constraints that determine the potential of a global event becoming a long-term global disruptor. We think that anything above the 75% mark should be studied with particular interest.