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AMLO – The Last Man Laughing
Mexican president saddles successor with fiscal, political and reputational baggage.
BY JOHN PRICE
The start of Mexico’s next sexenio cycle is historic for several reasons. But instead of celebrating the inauguration of Mexico’s first female president, first Jewish president, and first environmentalist president, investors are frowning over Mexico’s awkward political transition.
An odd wrinkle in Mexico’s political calendar gifted outgoing President López Obrador with the power to change the constitution, thanks to a landslide victory by his Morena party and their new leader, president-elect Claudia Sheinbaum. By securing a supermajority in the Chamber of Deputies and a near supermajority in the Senate, as well as over 60% of the governorships, the very high threshold of constitutional reform was met by Sheinbaum’s victory, but the spoils went first to the perennially frustrated, soon-to-retire AMLO. With the power to make dramatic changes to Mexico without having to carry the political baggage of his actions, López Obrador can’t keep himself from cursing his successor.
For six years, AMLO failed to enact the long list of reforms and changes that were just out of legislative reach. When he did make advances on his agenda, he frequently did so by breaking Mexican law or a standing international accord. It was Mexico’s independent judiciary that repeatedly limited his power. Not surprisingly, judicial reform led the list of changes AMLO chose to implement via his Plan C. By moving to an elected judiciary, many fear, Mexico will politicize (and pollute with dubious actors) what should be a meritocracy driven institution.
AMLO has also moved forward with disbanding seven of the country’s most heralded autonomous oversight agencies that were the building blocks of a more transparent and objectively governed economy. Foreign investors now feel less protected and more exposed to political risk. Both domestic and foreign investors will be hesitant to invest in sectors where state owned entities or national champions compete, if they are no longer governed by an autonomous regulator.
To top things off, after five years of parsimonious fiscal governance that earned AMLO begrudging respect from the sovereign debt ratings agencies, he blew the bank in an election year to help solidify the Morena party’s complete political dominance.
On October 1st, Claudia Sheinbaum’s sexenio commences. She has been deferential to her political godfather, AMLO, but everyone recognizes that she is cut from a different cloth. Schooled in the US, fluent in English, a scientist by academic training, a technocrat by nature, she is a sharp contrast from AMLO whose political mold was formed in the 1970s, when the PRI governed autocratically and the president was God-like. But instead of breathing new life into Mexico, this year’s election transition promises to saddle the new administration with fiscal, political and reputational baggage that could take at least three years to shed. Foreign direct investment as a share of the GDP has reached a 50-year low, the Mexican peso is the world’s worst-performing currency since June, and institutional investors are underweighting their Mexican exposure. Thanks very much Mr. President.
John Price is the Managing Director of Americas Market Intelligence. With 20 years of experience in Latin American market intelligence consulting, Price has supervised nearly 1,200 client engagements and advises clients in more than 20 countries across Latin America. He can be reached at jprice@americasmi.com
This article was first published by AMI. Republished with permission.
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