Mexico’s leftist chief unnerves investors

Amlo: the honeymoon is over
An “unlikely honeymoon” between Wall Street and Mexican president-elect Andrés Manuel López Obrador (known as Amlo), a leftist nationalist, is over before he even takes office on 1 December, say David Luhnow and Robbie Whelan in The Wall Street Journal.

Amlo cancelled the country’s biggest public-works project – the new, $13.3bn Mexico City airport that was one-third complete – and announced a series of public referenda to let voters decide key policy issues. Other measures include a proposed bill to outlaw many forms of banking fees on customers, sparking fears “the country could face a return to the kind of financial turbulence that roiled it in the 1970s, ’80s and early ’90s”.
One major concern is that his “landslide victory” means his party controls both houses of Congress, and vacancies at the country’s supreme court and central bank will allow him to further consolidate power. This makes him “a latter-day Aztec emperor”, says Jude Webber in the FT. Amlo is unlikely to change course either. Despite the fact that the peso is now at its weakest in five months, the stockmarket has retreated and Mexico’s ten-year bond yields are at their highest in a decade, the new president has said that “people’s polls are here to stay”.
Investors should stay calm, says John Authers on Bloomberg. The new president inherits a strong fiscal position, which gives him plenty of leeway. And with stocks “priced for the new president to be a despicable and irresponsible tyrant”, there may even be bargains available. Thanks to the recent declines, Amlo doesn’t need to do much to show investors that they have grown too cautious too quickly.

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