 |
| Obrador: His politics have frightened investors |
An attempt to bar leftist presidential hopeful Andres Manuel López Obrador from running in Mexico’s 2006 elections has backfired and turned Mexico City’s mayor into a hero for many, and the favourite to win, much to investors’ dismay. The mayor has spoken of renegotiating Mexico’s debt and has pledged to overhaul the pro-market economy to benefit the poor, promising “a new economic era”. Bankers and bondholders are already assuming the worst. The spectre of López Obrador as president is jangling nerves in investment houses in Mexico and abroad, and incumbent president Vicente Fox has done nothing to help the situation. In a protracted battle, Fox’s government accused López Obrador, who heads the opposition PRD party, of ignoring a court order in a minor land dispute, and a state attorney began proceedings against him in April, forcing him out of the election race. The conflict provoked a run of anti-government protests. Fears of a full-blown political crisis prompted international and local investors to abandon stocks, bonds and pesos. At the height of the unrest at the end of April, Mexico’s stock market fell 2.3% in one day, its biggest fall this year. By mid May, the exchange had accumulated a loss of about 13% since it hit a record high in March.
Fox was forced to capitulate to defuse the crisis and dropped the case. The mayor claimed victory. López Obrador now has an approval rating of more than 80% in Mexico City and nationally leads his closest presidential rivals by at least 10 points.
“Hanging over investors’ minds will now be the prospects of a stronger López Obrador participating in the 2006 presidential race,” says Alonso Cervera, an analyst at Credit Suisse First Boston.
As one of only two investment-grade sovereign credits in Latin America, Mexico is unlikely to experience a sudden collapse if López Obrador takes the helm.
The economy is solid, not least because of strong trade ties with the US, and Fox has brought unprecedented stability since ending one-party rule in 2000. The economy grew 4.4 % in 2004, compared with just 0.6% in each of the previous three years, and growth is expected to come in at just under 4% in 2005. López Obrador is also unlikely to be able to dismantle the economic interdependence of Mexico and the US created by the 11-year-old North American Free Trade Agreement.
