The markets’ reaction to Andrés Manuel López Obrador’s (Amlo) presidential election in July was muted – expected sell-offs didn’t materialize and calm greeted the news – but the honeymoon is over… and it didn’t quite last until he’d actually taken power.
His decision to scrap the new Mexico City airport has seriously shaken investors’ faith in Mexico’s future. The currency fell sharply, bond yields rose.
The decision was made by a shaky plebiscite – which, as anyone with only a passing knowledge of British politics in recent years, is not a great way to decide anything.
On a recent visit to Mexico, no one Euromoney interviewed thought there was any real risk of the project being scrapped.
“It’s there already,” was the common reply – and, in fact, bizarrely it is still being built: president Enrique Peña Nieto, who remains in power until December 1, has declined to cancel building operations, citing it would be “too expensive to cancel”.
Dismay
It has caused a lot of dismay and attracted lots of critical comments in research reports, but surely Brazilian brokerage XP Investimentos is getting a little carried away.
It’s research note after the decision stormed: “Mexico has been all but downgraded to Banana Republic status by the international finance community following Amlo’s airport decision.”
Euromoney is now waiting for an XP report that follows the domestic news that Brazilian president-elect Jair Bolsonaro has chosen the judge that jailed his leading rival for the presidency – ex-president Luiz Inácio Lula da Silva – to be his new justice minister.
Bananas anyone?
