Andres Manuel Lopez Obrador, better known as AMLO, became the new president of Mexico on December 1st. After being a candidate three separate times, the leftist politician finally was able to give the inaugural Presidential speech in Congress last Saturday. What’s next for the country, and the Mexican Peso?
The country is currently facing important challenges that the new administration has vowed to address, including issues of violence, corruption and how to reduce poverty. From a financial markets perspective, the new anti-establishment leftist president has the markets spooked, even as he works to portray an image of a business-friendly budget balancer.
AMLO reiterated many of his campaign promises this weekend, including the controversial decision to cancel the construction of a new airport. He also continued his critique of the right-leaning economic model that has ruled the country for most of the last 80 years.
Before the inauguration, Mexican stocks and the peso had been sliding for months. Nevertheless the Mexican peso slightly appreciated on the Monday after the inauguration, mainly due to the possibility of China and US ending the trade war, but also because of a statement the new president made early in the morning about the government’s willingness to buy back some of the bonds sold to finance the construction of the new airport. It was precisely the decision to cancel the new airport which took the peso above the 20 MXN per USD barrier in November.
To support his populist image, AMLO opened “Los Pinos”, the presidential residence, to the public. He will also continue to live, at least for the foreseeable future, in his house located in a middle-class neighborhood. Additionally, the presidential airplane and other planes and helicopters will very soon be put for sale in an effort of the new government to demonstrate the initiative of ending corruption and excess.
The Mexican financial markets are still uncertain of how AMLO will carry out the promise to be fiscally responsible and address major influencing factors on the Mexican economy, such as the immigration crisis, and promises made around pensions for the aging and grants for students among many other social policies. On Tuesday, the new president said that the rise in the stock exchange and the peso since he took office shows that the markets have confidence in his administration. His next major hurdle is finalizing the governmental budget, which must be presented by the end of December. We will continue to watch and report on how the currency and stock markets unfold in the wake of the administration change.
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