Mexico’s outgoing president vows to pursue changes to Constitution despite market nervousness

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Mexico’s outgoing President Andrés Manuel López Obrador has vowed to push ahead with constitutional changes despite concerns from investors and his own handpicked successor, Claudia Sheinbaum.

López Obrador announced that he will pursue 20 constitutional amendments after his Morena party won a two-thirds majority in Congress in Sunday’s elections. The reforms include making all judges run for election and enshrining unfunded benefit mandates in the Constitution.

Sheinbaum had previously suggested that the reforms should be subject to dialogue, but López Obrador mocked any opposition to the changes, calling critics “promoters of nervousness” and claiming that big corporations are worried about losing judges who protect their interests.

Markets did not seem reassured by López Obrador’s stance, with the peso closing at 18.36 to $1, a 10% drop from last week, and Mexican stocks falling by 2.7%.

Analysts say that López Obrador is angry about the country’s judiciary blocking several of his previous reforms because they were ruled unconstitutional.

López Obrador has also pledged to continue talking to Sheinbaum after she takes office on October 1st, despite previously saying he would retire from politics entirely. This has raised questions about how much influence he will exert over her administration.

Markets are also concerned about Mexico’s current budget deficit equivalent to about 6% of GDP and payments to the country’s debt-laden state-owned oil company, Pemex. Additionally, high inflation persists at nearly 5%, despite high domestic interest rates.

López Obrador has previously bragged about the peso’s strength and a reduction in poverty, but experts say these gains are due in part to remittances from Mexican migrants working abroad. Remittances rose from $36 billion in 2019 to $63.3 billion in 2023.

Markets are also nervous about the ongoing costs of supporting Pemex and state-run transport projects.

Source: AP News