Left-winger Claudia Sheinbaum will be Mexico’s next president after an electoral landslide. Sheinbaum secured between 58% and 60% of the vote in Sunday’s presidential election, compared with about 28% for her main conservative rival.
Sitting president Andrés Manuel López Obrador (known as AMLO) was prevented from seeking re-election by term limits, with Sheinbaum pledging to carry forward his political programme. AMLO is hugely popular, but has had a fraught relationship with investors during his six-year term in power.
Nevertheless, the country’s IPC stock index has gained more than a fifth over the past five years, while economic growth has been creditable. That’s not a bad showing given AMLO’s background as “a self-proclaimed leftist revolutionary”, says Barron’s. While social spending has risen, he has avoided budget splurges for most of his presidency.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Debt remains a reasonable 50% of GDP. Mexico has been the biggest winner of the US-China trade war, which has seen vehicle and electronics manufacturers scramble to relocate to America’s southern neighbour. AMLO’s legacy might prove a poisoned chalice, says The Economist. Gang violence is rampant and corruption is as rife as ever. Yet Mexicans were sceptical that the opposition would do a better job, and many working-class and rural voters are “in thrall” to the charismatic AMLO and Morena, the governing party.
Will Claudia Sheinbaum bring change?
Mexican markets have been in party mode, says Michael Stott in the Financial Times. Stock issuance tripled last year and corporate bond sales were the highest in eight years. It's been argued that Sheinbaum offers continuity with “a dash of technocratic modernity”. But the Mexican “revellers” have been ignoring some rather “large elephants” in the room.
Cartels now control an estimated third of the nation’s territory, by one estimate, and public finances have weakened after AMLO ditched austerity to engage in a pre-election spending bonanza – the country is now running its highest fiscal deficit since 1988. Mexico boasts “a rising middle class” and “enviable demographics, with a median age of 30”, says Mary Anastasia O’Grady in The Wall Street Journal. But economic progress has come “despite AMLO, not because of him”.
His endless feuding with courts that blocked his orders has undermined the rule of law. Now Sheinbaum is championing reforms such as direct elections to the Supreme Court that could steamroller the last remaining opposition to Morena. The ruling party also secured a two-thirds supermajority of the seats in the Mexican lower house and almost as many in the Senate, leaving it well-placed to pass constitutional amendments.
That prospect triggered an earthquake in Mexican markets on Monday, says John Authers on Bloomberg. The S&P Mexico Bolsa index plunged almost 10% in dollar terms, its third worst day in two decades. The sharp sell-off is “probably” an overreaction, but there’s no doubt that the prospect of Mexico taking an authoritarian turn is “terrifying” investors.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
Are money problems driving the mental health crisis? MoneyWeek TalksPodcast Clare Francis, savings and investments director at Barclays, speaks about money and mental health, why you should start investing, and how to build long-term financial resilience.
-
Pensioners ‘running down larger pots’ to avoid inheritance tax as rule change loomsChanges to inheritance tax (IHT) rules for unused pension pots from April 2027 could trigger an ‘exodus of large defined contribution pension pots’, as retirees spend their savings rather than leave their loved ones with an IHT bill.
-
UK small-cap stocks ‘are ready to run’Opinion UK small-cap stocks could be set for a multi-year bull market, with recent strong performance outstripping the large-cap indices
-
The scourge of youth unemployment in BritainYouth unemployment in Britain is the worst it’s been for more than a decade. Something dramatic seems to have changed in the labour markets. What is it?
-
Anthropic’s Dario Amodei: The AI boss in a showdown with TrumpAnthropic’s CEO Dario Amodei was on an extraordinary upward trajectory when he found himself on the wrong side of the American president. He is about to be severely tested.
-
The downfall of Peter MandelsonPeter Mandelson is used to penning resignation statements, but his latest might well be his last. He might even face time in prison.
-
In defence of GDP, the much-maligned measure of growthGDP doesn’t measure what we should care about, say critics. Is that true?
-
Reach for the stars to boost Britain's space industryopinion We can’t afford to neglect Britain's space industry. Unfortunately, the government is taking completely the wrong approach, says Matthew Lynn
-
"Botched" Brexit: should Britain rejoin the EU?Brexit did not go perfectly nor disastrously. It’s not worth continuing the fight over the issue, says Julian Jessop
-
Ayatollah Ali Khamenei: Iran’s underestimated chief clericAyatollah Ali Khamenei is the Iranian regime’s great survivor portraying himself as a humble religious man while presiding over an international business empire
