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(Bloomberg) — President Andres Manuel Lopez Obrador is leaving his successor in Mexico a volatile currency, tepid economic growth and the widest budget deficit since the 1980s. But the most urgent challenge Claudia Sheinbaum will face is calming investor fears over the outgoing leader’s overhaul of the judiciary.

The plan, which will see Mexico elect thousands of judges and magistrates nationwide, was approved this month amid outcry from the opposition, investors and business leaders who fear it will remove checks and balances on the ruling Morena party and erode the rule of law.

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Sheinbaum, who takes office Oct. 1, signaled continuity a day after the vote, confirming that most of the existing Finance Ministry team will remain in their posts. But given the current president’s record of clashing with private business while giving handouts to the heavily indebted state oil company, it’s unclear how reassuring that will be to investors.  

In addition to riling two of Mexico’s biggest trading partners — the US and Canada — and raising questions about judicial independence, the overhaul has sparked concern about how far Morena will go to pass other radical reforms proposed by AMLO, as the outgoing nationalist leader is known. The list includes eliminating independent regulators in the energy and telecom sectors in favor of ministerial oversight.

Sheinbaum will “bear a heavy political cost for the approval of the judicial reform,” said Amrit Singh, executive director of the Rule of Law Impact Lab at Stanford Law School in California. The president-elect “will have trouble convincing Mexicans that she genuinely intends to place their interests above political calculations that require her to continue AMLO’s legacy.”

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The way in which Morena engineered its legislative victory in the final month of Lopez Obrador’s six-year term, by flipping one opposition senator amid allegations of coercion, only added to fears that the party will stop at nothing in its pursuit for power.

The senator who cast the decisive vote — at the last minute, after a prolonged absence — called the reversal of his earlier position against the reform “the hardest decision” of his life. Another opposition lawmaker never made it to the floor, amid allegations that his father was detained and his house surrounded by police officers.

The change in the senator’s vote came after a top-ranking Morena member, former Interior Minister Adan Augusto Lopez, allegedly promised that the government would shelve corruption investigations against him and his family, according to political columnists in Mexico. And the opposition lawmaker who never made it to the session was threatened with his father’s arrest if he left the city of Campeche and followed through on his pledge to vote against the plan, according to his Movimiento Ciudadano party. An El Pais investigation suggested that his absence was agreed to beforehand.

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AMLO acknowledged at his Sept. 11 daily press briefing that Lopez might have spoken with the senator who changed his vote, but denied that the congressman had been paid or threatened. “In politics, it is always necessary to choose between disadvantages and to seek a balance between efficiency and principles,” the president said about the strategy to get the missing vote.

Even Mexican pundits who previously defended the Morena leadership were shocked that the president and his allies took such flagrant measures to get the contentious reform approved. So now it’s up to Sheinbaum to repair the party’s image and to show that her legislators will get in line behind someone other than AMLO, whose son was named to a top Morena leadership post on Sunday.

“He is imposing on her a scenario that is highly conflictive and disruptive by promoting an enormous reform — the most important in decades — just before she starts her government,” said Ricardo Becerra, president of the Institute of Studies for a Democratic Transition, a think tank in Mexico’s capital. 

Despite the challenge, Sheinbaum has sought to develop her own plans over the past months. Speaking to reporters last week, she denied that Lopez Obrador will continue to have a commanding voice during her administration, noting that he’s repeatedly said he’s retiring to write a book.

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However, the president-elect said she will continue implementing AMLO’s vision for Mexico, including judicial reform. “Our adversaries want there to be a rupture, but there cannot be a rupture if we have been building this project together,” Sheinbaum said. Her office didn’t respond to a request for comment on this story.

Beyond political fallout from the overhaul, the new president also has to address economic setbacks left behind by Lopez Obrador. 

As of Friday, the Mexican peso had fallen about 14% since the June election and was one of the worst-performing major currencies as lawmakers discussed AMLO’s plan to elect judges. The central bank recently cut its growth forecast for this year to 1.5% from 2.4% previously, and lowered its estimate for 2025 to a 1.2% economic expansion. 

State oil giant Petroleos Mexicanos, meanwhile, has nearly $100 billion in debt that’s required frequent government support to pare down. AMLO said Friday he expects Sheinbaum to continue injecting cash because she “agrees with what we have established” and that “our economic policy will continue.”

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Pemex’s needs will be a major factor when the president-elect presents a final budget in November, though she’s aiming to narrow the deficit to under 3.5% of gross domestic product from a bulging 5.9% currently. 

Then there’s managing the relationship with Mexico’s neighbors after both the US and Canadian ambassadors spoke out against the judicial overhaul. Washington could seek changes during the 2026 review of the North American free-trade agreement, opening up avenues for international arbitration instead of limiting companies to resolutions in Mexican courts, according to Andy Shoyer, a partner at Sidley Austin LLP who was previously a legal adviser in the Office of the US Trade Representative.

After winning the election in a landslide with nearly 60% of the vote, the former mayor of Mexico City has broad domestic maneuvering room. But worries around judicial reform and the legislative arm-twisting required to pass it raise questions about whether international investors might turn away from Mexico.

Sheinbaum’s inaugural speech after taking office will be a key signal to markets, according to Gabriela Soni, head of investment strategy at UBS Mexico, who is hoping to hear a conciliatory message after AMLO’s clashes with big business. “They have very little fiscal room,” Soni said, “so they have to open up to the private sector in order to achieve their ambitious agenda.”

—With assistance from Scott Squires.

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