Mexico’s warning
Sheinbaum, 61, who will become Mexico's first woman president, and her party adjutants promise they aren't planning to step on the losing side when they take over in October.
The leader of the Morena party in the lower house said it will be "very prudent" about taking advantage of its strong lead in congress. And Morena's senate chief chimed in with a pledge that "we will not act in an authoritarian manner or impose proposals that affect the harmony and the confidence in Mexico."
Investors were nevertheless rattled by the idea that—by convincing a handful of non-Morena senators to join them—the party will be in a position to overhaul the constitution. The peso on Friday wrapped up its worst week in almost four years, sliding more than 7% against the dollar.
The outgoing president, who wasn't able to run again after his single six-year term, reiterated on Friday his desire to push constitutional reforms. AMLO's proposals include replacing the current Supreme Court with elected justices and eliminating independent regulators. AMLO's enduring popularity was instrumental in the election, and raises the question about his potential continuing influence going forward.
Claudia Sheinbaum and Andres Manuel Lopez Obrador in 2021. Photographer: Gerardo Vieyra/NurPhoto
"The outcome consolidates AMLO's political hold and will make it more difficult for Sheinbaum to diverge from his road map," said Felipe Hernandez, a Latin America economist at Bloomberg Economics.
While most of the constitutional changes AMLO has sought are political rather than directly economic, the danger of embedding populism more deeply into the Mexican constitution is that it spooks private-sector enterprises, including foreign ones, from boosting investment.
Some business leaders see signs that Sheinbaum could be more open to change the nationalist energy policies implemented by AMLO. But that remains to be seen. She has mostly stuck to the basic tenets that made the outgoing leader so popular: promising to expand welfare programs and decrying corruption at all ranks.
When AMLO took office in 2018, there were big hopes of doubling economic growth to an average annual 4% compared with the 2% recorded in the previous administration.
Instead, it halved. With only a few months left to go in office, average growth during his administration "is likely to be close to 1%," Hernandez estimates.
That would be the weakest since the Latin American debt crisis period of the 1980s. True, AMLO's term included the pandemic. But previous presidents had to contend with the 2007-09 global financial crisis and the home-grown Tequila Crisis of the mid-1990s.
The Petroleos Mexicanos Dos Bocas Olmeca refinery in Paraiso, Mexico. Mexico will need major investment to maintain or boost its energy exports in coming decades. Photographer: Alejandro Cegarra/Bloomberg
"Nationalist government policies expanding the role of the public sector in the economy and limiting private investment in energy and other strategic sectors have been a drag on growth," Hernandez says. That's limited the potential for Mexico to make full use of the free trade agreement it has with the US and Canada.
Hernandez warns that, if similar policies are maintained, that could shave as much as 0.7 percentage point a year off of the growth trajectory Mexico could have enjoyed had it maintained the pre-AMLO economic policy framework.
With months to go before she takes office, it may not be clear for some time which way Sheinbaum will head. Much may also depend on who American voters choose in their own November election—though Sheinbaum has pledged to maintain good relations regardless.
In fact, an appreciation of the importance of US ties could be the most important brake—among many—on any Chavez-Venezuela scenario, Hernandez says. "If they truly understand the importance of the US for Mexico, as it seems they do, then that puts a limit on what they can change." —Chris Anstey
The leader of the Morena party in the lower house said it will be "very prudent" about taking advantage of its strong lead in congress. And Morena's senate chief chimed in with a pledge that "we will not act in an authoritarian manner or impose proposals that affect the harmony and the confidence in Mexico."
Investors were nevertheless rattled by the idea that—by convincing a handful of non-Morena senators to join them—the party will be in a position to overhaul the constitution. The peso on Friday wrapped up its worst week in almost four years, sliding more than 7% against the dollar.
The outgoing president, who wasn't able to run again after his single six-year term, reiterated on Friday his desire to push constitutional reforms. AMLO's proposals include replacing the current Supreme Court with elected justices and eliminating independent regulators. AMLO's enduring popularity was instrumental in the election, and raises the question about his potential continuing influence going forward.

Claudia Sheinbaum and Andres Manuel Lopez Obrador in 2021. Photographer: Gerardo Vieyra/NurPhoto
"The outcome consolidates AMLO's political hold and will make it more difficult for Sheinbaum to diverge from his road map," said Felipe Hernandez, a Latin America economist at Bloomberg Economics.
While most of the constitutional changes AMLO has sought are political rather than directly economic, the danger of embedding populism more deeply into the Mexican constitution is that it spooks private-sector enterprises, including foreign ones, from boosting investment.
Some business leaders see signs that Sheinbaum could be more open to change the nationalist energy policies implemented by AMLO. But that remains to be seen. She has mostly stuck to the basic tenets that made the outgoing leader so popular: promising to expand welfare programs and decrying corruption at all ranks.
When AMLO took office in 2018, there were big hopes of doubling economic growth to an average annual 4% compared with the 2% recorded in the previous administration.
Instead, it halved. With only a few months left to go in office, average growth during his administration "is likely to be close to 1%," Hernandez estimates.
That would be the weakest since the Latin American debt crisis period of the 1980s. True, AMLO's term included the pandemic. But previous presidents had to contend with the 2007-09 global financial crisis and the home-grown Tequila Crisis of the mid-1990s.

The Petroleos Mexicanos Dos Bocas Olmeca refinery in Paraiso, Mexico. Mexico will need major investment to maintain or boost its energy exports in coming decades. Photographer: Alejandro Cegarra/Bloomberg
"Nationalist government policies expanding the role of the public sector in the economy and limiting private investment in energy and other strategic sectors have been a drag on growth," Hernandez says. That's limited the potential for Mexico to make full use of the free trade agreement it has with the US and Canada.
Hernandez warns that, if similar policies are maintained, that could shave as much as 0.7 percentage point a year off of the growth trajectory Mexico could have enjoyed had it maintained the pre-AMLO economic policy framework.
With months to go before she takes office, it may not be clear for some time which way Sheinbaum will head. Much may also depend on who American voters choose in their own November election—though Sheinbaum has pledged to maintain good relations regardless.
In fact, an appreciation of the importance of US ties could be the most important brake—among many—on any Chavez-Venezuela scenario, Hernandez says. "If they truly understand the importance of the US for Mexico, as it seems they do, then that puts a limit on what they can change." —Chris Anstey
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