Mexico: the peso and the stock market registered sharp falls after the victory of Claudia Sheinbaum and the ruling party

The Mexican peso lost 4.3% to close at 17.7 units per dollar, according to figures from the Bank of Mexico (central, Banxico) at the close of the session this Monday, compared to 16.96 units per greenback on Friday. past.

The Mexican Stock Exchange (BMV) sank 6.01%a drop equivalent to 3,315.85 points, so its main indicator, the Price and Quotation Index (CPI), closed at 51,863.39 units.

For months, the dollar had traded below 17 pesos, driven by the high interest rates offered by the country, the impact of remittances and Foreign Direct Investment (FDI).

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“The markets reacted negatively to the electoral results because it is very likely that Morena will obtain a qualified majority in Congress, which makes it possible to approve pending constitutional changes,” Víctor Ceja, chief economist at the financial firm Valmex, told AFP. .

Gabriela Siller, analyst at the firm Banco Base, told the press that Sheinbaum should give a message of calm to the markets.

“The best thing would be to say that the autonomy of the Bank of Mexico will not be changed, its mandate will not be changed, there will be fiscal discipline and the division of powers or the autonomous bodies will not be touched,” he said.

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With almost 90% of the votes counted according to the platform of the National Electoral Institute (INE), Sheinbaum, 61, had 59% of the votes, thirty points above his closest follower, the center-right Xóchitl Gálvez.

The left-wing coalition, made up of the ruling Morena, the Green Party and the Labor Party, has two-thirds of the Chamber of Deputies and will probably also reach them in the Senate.

Sheinbaum inherits a fiscal deficit of almost 6%, the largest in a quarter of a century despite Amlo’s austerity policies. In the last six-year term, the country barely grew 0.8% on average.

“The most important challenge for the next administration will be to correct the high fiscal deficit,” says Víctor Ceja, chief economist of Valmex.

(You can read: Elections in Mexico: a man died of a heart attack while waiting for his turn to vote)

The president-elect needs to swell the state coffers to finance the direct aid that 25 million young, elderly and disabled Mexicans currently receive and carry out other reforms.

“You need to spend money on many things, and there is no money. The infrastructure is obsolete. Electricity is a problem. (State oil company) Pemex is a problem,” summarizes Pamela Starr, an expert on Mexico at the University of Southern California.

Sheinbaum is betting on “nearshoring”, the transfer of a part of the production of foreign companies to northern Mexico, to attract investments.

But Carlos Ramírez, from the risk consulting firm Integralia, warns that “nearshoring is not Mexico’s great lifeline” and that its eventual success depends on improving security and infrastructure, water and energy supply.

“There is a lack of tax reform that increases revenue (…) The status quo is unsustainable,” he estimates.

Water, whose availability has fallen 68% per capita since 1960, became a key campaign issue amid a heat wave, record temperatures and a drought affecting hydroelectric dams.

With a doctorate in environmental engineering, Sheinbaum promises to increase investment in clean energy, while Amlo bet on fossil energy by injecting millions into the indebted Pemex.