Likely presidential win by populist Lopez Obrador adds uncertainty to Mexican economy

Tuesday, 24 April 2018 23:13:44 (GMT+3)   |   San Diego
       

According to Mexico-based sources that requested to remain anonymous during the recent ISRI Vegas event, a list exists with over 40 entities that are seeking to place their manufacturing facilities in Mexico over the next 18 months. Trade negotiations with the US and Canada are expected to have positive results. Additionally, the established logistics are viewed as core strengths. But the upcoming Mexican presidential election on July 1 is injecting uncertainty into the domestic economy. Many Mexican media channels are pronouncing Andrés Manuel López Obrador as the likely victor.

As a result, the exchange rate has started to reflect the investor pessimism as “they fear the potential challenges from the populist candidate” per Bloomberg. The exchange rate is presently at MXN 18.86 pesos per dollar after achieving an exchange rate of MXN 18.04 pesos on April 16. The items of highest concern for investors is regressive changes in the energy industry that will decrease international investments and higher social expenses that may worsen the country’s deficit.

According to Eric Viloria a strategic analyst for Wells Fargo, the exchange rate could reach and maintain a level of MXN 19 pesos to the dollar by the end of April and into May until the elections become final.

Speaking to Mexican business and associate representatives on the sidelines of the ISRI Vegas convention the week ended April 20, several noted proactive efforts my Mexican national organizations and leaders to work together “to provide the markets with stability despite of the political changes.” One noted, “It is important that businesses in Mexico communicate stability to domestic and international investors despite the usual political changes that affect us, and we are going to do this by organizing ourselves better.”

Mexico has seen substantial growth over the past 20 years, especially the El Bajio region, among others, that have attracted manufacturing companies, particularly those involved in the automobile industry. The decades of gains are attributed to the North American Trade Agreement (NAFTA) as well as growth in the domestic market.


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