CEO Executive Summary
The much-anticipated landslide victory for Andrés Manuel López Obrador (AMLO) in the Mexican presidential election dominated the news this past month. His victory translated into large majorities in both houses of the federal legislature, at least five governorships, and majorities in more than half of state legislatures. And it gave him a powerful mandate to remake Mexico economically and politically. This landslide swept away the political party system that had dominated Mexican politics for decades. The ruling PRI party and its erstwhile ally the PAN were savaged at the polls, while the historic face of the Mexican left, the PRD, along with four other parties, are at risk of losing their registration and being eliminated from the political scene. This means that AMLO is well-positioned to build a majority large enough to modify the Mexican constitution, leading some analysts to express fear about the potential erosion of democratic checks and balances. At the same time, this will prevent him from pointing to a lack of political support as an excuse for any shortcomings during his administration.
In true democratic fashion, López Obrador’s opponents immediately recognized his election victory, while AMLO’s victory speech called for national reconciliation after a hard-fought campaign. Suggesting a smooth transition, AMLO’s July 3 meeting with President Enrique Peña Nieto went very well. Equally reassuring were his post-election pro-democracy statements, which assured his fidelity to the rule of law, his intention to drive reform through democratic and judicial means, and his outright rejection of authoritarianism.
AMLO’s relationship with the private sector is likewise off to an encouraging start. In his meetings with business leaders, he has expressed his willingness to collaborate with the private sector. For their part, leaders across industry, in a video message to AMLO have expressed their patriotic willingness to work with the new government.
In U.S.-Mexico relations, the NAFTA talks took a break in June with the expectation that they would begin anew later in July. An experienced trade hand, Jesús Seade, is expected to join the Mexican team during the next round of talks as López Obrador’s representative. But we don’t expect this to make a marked change in the tone of the negotiations since Seade and AMLO have both expressed support for Mexico’s NAFTA stance, and since the main obstacle to success has not been the Mexicans but the Trump Administration. More broadly, we expect Washington’s antagonistic attitude toward Mexico and AMLO’s focus on human rights, the protection of immigrants and crime prevention, rather than any Mexican hostility to U.S. interests, to lead to somewhat less Mexican cooperation with the United States, especially in the areas of security and immigration.
The Mexican economy in June exhibited signs of slow growth with stable inflation, while the peso went on another wild ride. It plummeted to a 16-month low in the wake of the mid-June U.S. Federal Reserve’s decision to raise interest rates, but it strengthened following the Bank of Mexico’s decision to follow suit. And despite some volatility surrounding the election, the peso has strengthened while country risk has fallen, an indication that AMLO’s effort to calm markets in the wake of his victory has been successful so far.
Full Newsletter: Monarch News – July 2018
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