Left-wing party solidifies power in Mexico, causing peso to plummet after election

Mexico’s Peso Plummets as Left-Wing Party Secures Major Victory

Mexico’s peso is facing its worst week since the beginning of the pandemic as investors react to a significant victory for the ruling left-wing party, Morena. The party, led by current president Andrés Manuel López Obrador, secured a near two-thirds majority in Congress, allowing them to enact major changes to the country’s political system.

The market turmoil deepened as López Obrador vowed to press ahead with his proposed reforms, despite concerns from investors. The president emphasized the importance of justice over market concerns, stating, “The elites don’t think of the country.”

The peso has weakened almost 8 per cent against the dollar this week, with the stock index also down 3.4 per cent over the past five sessions. López Obrador’s proposed reforms include eliminating independent regulators and directly electing supreme court justices and electoral authority board members.

The unexpected victory for Morena has raised concerns among investors about the future stability of Mexico’s economy. The president’s ambitious reforms could potentially violate the country’s trade agreement with the US and Canada, impacting foreign investment.

As the peso continues to weaken, analysts warn that the reforms could have a negative impact on the country’s economy. Gaby Siller, an analyst at Banco Base, expressed concerns that the deteriorating rule of law in Mexico could lead to a slowdown in investment projects.

The incoming president, Claudia Sheinbaum, faces the challenging task of addressing a significant deficit in her first year in office. With uncertainty surrounding the future of Mexico’s economy, investors are closely watching how the new government will navigate these turbulent times.