Mexico’s tide of political fortune certainly looks to be in Andrés Manuel López Obrador’s (aka AMLO’s) favour as the country heads to the polls on 1 July for the Presidential Election. This is the third time that the hard-left candidate AMLO has run for President but this time his campaign looks to have gained sufficient traction with the voters to put him in poll position. More recent polls such as Consulta Mitofsky (excluding non-respondents) show AMLO ahead by a considerable margin at 48.1% of the vote. The centrist technocrat candidates José Antonio Meade for the PRI and Ricardo Anaya for the PAN-PRD coalition are vying for a distant second place with 22.5% and 25.5% of the vote respectively. Independent candidate Jaime Rodriguez had only 3.9% of the vote. But given the number of non-respondents are quite high in the surveys (21.5% in the Mitofsky) an element of caution is warranted when trying to interpret the results.
Voters are frustrated with the PRI administration under Enrique Peña Nieto and corruption and violence are cited as major concerns. There is clearly room for improvement: the 2016 World Bank Control of Corruption Index scores Mexico poorly. This has not helped Meade’s campaign and Anaya has struggled to distance himself from corruption allegations whilst AMLO has made stamping out corruption a key tenet of his agenda.
Thus, AMLO is widely expected to be the next President but what is perhaps less clear is what percentage of the vote his Morena party can capture in Chamber of Deputies and the Senate which also have elections on 1 July. With that there is an element of uncertainty in terms of AMLO’s policy direction (e.g. energy reform and NAFTA) although we think the country’s institutional frameworks are strong making it difficult to reverse a lot of reforms. AMLO also took a pragmatic approach in his role as Mayor of Mexico city and there have been some signs of pragmatism during his campaign.
Interestingly, the Mexican peso has gained ~4.9% against the US dollar (spot basis) since the June 14th close. Banxico raised rates by 25 basis points to 7.75% on 21 June which may have helped but the peso looks to have been oversold and an AMLO victory has largely been factored in. United Mexican States 6.05% 2040 has also bounced over 4 points off the June 12th low.