Mexico markets shaky aft er woman elected
MEXICO CITY — Hours after declaring victory, Mexico’s newly elected president, the first woman to win the job, faced a market meltdown Monday and a tough path toward reconciling a country deeply divided by outgoing President Andrés Manuel López Obrador.
Claudia Sheinbaum has promised to continue the political course set by her populist predecessor despite widespread discontent with persistent cartel violence, the weakening of democratic institutions and fears among investors that an already hostile environment might become much worse.
Hours after the election results were announced, the Mexican peso dropped over 4% in value to close at 17.71 to $1, and the Mexican stock exchange took a dive to close off 6%.
Gabriela Siller, director of analysis at Nuevo Leon-based Banco Base, noted that Sheinbaum’s victory, along with an apparent super-majority in Congress for her Morena party, raised fears.
It “opened the possibility of changes in the Constitution,
which alters, or better put, deteriorates the risk balance of Mexico, causing capital to leave the country,” Siller said.
The strong peso — which has gained steadily against the dollar on the back of increased remittances in the last year — was something López Obrador counted as his own achievement. But analysts have suggested for some time the Mexican currency is over-valued.
With words like “capital flight” and “black Monday” flying around financial markets, quick action to calm markets was urgently needed. But Sheinbaum’s team’s immediate reaction appeared muddled; they announced — and then quickly canceled — plans for her to hold a news conference.
López Obrador appeared determined Monday to push through his highly divisive constitutional changes — many of which opponents fear will fatally weaken Mexico’s democracy — before he leaves office on Sept. 30.
The Morena party that López Obrador founded and in which he remains far more personally popular than Sheinbaum, appeared to be on track to win the two-thirds majority needed to change the Constitution. López Obrador has already laid out 20 constitutional changes he plans to submit.