The victory of Andrés Manuel López Obrador (Amlo) in Mexico’s presidential elections may not have been the markets’ preferred outcome, but at least the arrival of clarity has led to a positive investment narrative.
Amlo’s resounding victory should give him legislative flexibility, while his conciliatory messages to the markets immediately after the election – in contrast to the bellicose messages during the campaign – have also settled nerves. Throw in the much-reduced risk around the collapse of the North American Free Trade Agreement (Nafta) and many of the ingredients for a recovery in deal activity are in place.
Only the general and global jitters around emerging markets – sparked by Turkey but that also highlight other countries’ structural and political weaknesses – could limit the capacity of the recovery, Mexican-based bankers say.
‘Recovery’ may be too strong a word: debt capital markets activity from Mexican issuers has been resilient so far in 2018. Nearly $30 billion has been raised year to date (compared with $46.8 billion in 2018 and $49.4 billion in 2016), according to Dealogic, but this has been skewed to the sovereign, which issued $5 billion in the first week in January alone, and large quasi-sovereign issuers.
