What can be the outcomes for the Mexican election ?

News - 6/29/2018

Analysis ahead of the Mexican election, by Patricia Urbano, Emerging Markets equities specialist at Edmond de Rothschild Asset Management

The Mexican election is getting closer. On Sunday, July 1st Mexicans will choose their new President and renew the whole Congress (both the lower house and the Senate). The polls remain consistent in showing a large advantage in favour of Andrés Obrador (also known as “AMLO”), from the Morena party.  There is just one round in the Mexican presidential election, which favours last minute alliances that can cause surprises.  We nevertheless expect that Obrador will win the Presidential election with a significant footprint in Congress.

Obrador is running for the presidency for the third time. His popularity has increased following Trump's speeches against Mexican immigrants and the repeat cases of corruption during the Pena Nieto administration. Indeed, AMLO’s campaign has been based on anti-corruption and nationalist positions.

Obrador has been a longtime critic of the energy reform. He is also proposing to increase social spending: more financial aid for students and the elderly, improved access to education. Yet, towards the end of his campaign, AMLO has been striking a more moderate tone. He has changed his position against the construction of the new international airport of Mexico City. He has changed his stance against more auctions of oil and gas fields. Obrador mentioned he will be more fiscally responsible than any other candidate, with an eye to build his credibility with investors. He wants to leave no room for mistakes.  AMLO managed to join forces with key business people and center-right groups in Mexico, confirming the appointment of Alfonso Romo, an influential business person, as his Chief of Staff.

The real economy is doing well. GDP growth is at 2.2%1, and unemployment is low at 3.2%1. The US economy is also doing well, which helps Mexico. Nevertheless, there are a lot of uncertainties. What will Trump do to the NAFTA trade agreement? Will Trump impose new import tariffs, especially on the auto sector? Will Obrador really be market friendly if he obtains the majority in Congress?

Source : OCDE