By T. Jayani, JadeTimes News
Claudia Sheinbaum's landslide victory in Mexico's presidential election marks a historic moment as she becomes the country's first female president. She inherits the legacy of her mentor and outgoing leader, Andres Manuel Lopez Obrador, whose popularity among the impoverished played a significant role in her triumph.
The ruling coalition's potential two-thirds super majority in both houses of Congress has raised concerns among investors regarding the possibility of constitutional reforms being passed without opposition support. This has led to a sense of nervousness in the markets, with fears of potential radical changes outlined in Lopez Obrador's proposed reforms.
Market analysts emphasize the need for reassurance from the president elect to calm market jitters. Sheinbaum's acceptance speech sought to address these concerns by emphasizing continuity in economic policies, including maintaining an autonomous central bank, upholding the separation of economic and political powers, and committing to fiscal discipline.
Despite her close association with Lopez Obrador, there are uncertainties about whether Sheinbaum will pursue her own agenda once in office, particularly in areas such as energy policy. While she has pledged to continue some of the outgoing administration's social programs, she has also indicated a willingness to adopt a more investor friendly approach.
The potential concentration of power in the hands of Sheinbaum's Morena party, especially if they secure a two-thirds majority, raises concerns about the erosion of institutional checks and balances. This, coupled with the prospect of divisive constitutional reforms, poses downside risks for Mexico's asset prices and could trigger widespread protests.
Overall, while policy continuity is expected under Sheinbaum's government, particularly in welfare policy, differences may emerge, particularly in areas such as energy policy and constitutional reforms. The main drivers for Mexican assets in the near term are likely to be external factors, such as actions by the Federal Reserve, rather than domestic politics.
