MEXICO CITY (AP) — The Mexican peso continued to weaken Tuesday as Mexico’s outgoing president — and his successor — vowed to press ahead with some two dozen constitutional amendments that have roiled investors.
Claudia Sheinbaum won the presidential election this month. But since then she has spent much of her time trying to reassure the markets, while not giving an inch on a controversial proposal to allow judges and justices to stand for election.
Sheinbaum asserted Tuesday that “investors have no reason to worry,” adding “to anyone investing in Mexico, I say there is (legal) certainty.”
Critics have claimed that outgoing President Andrés Manuel López Obrador wants to eliminate regulatory and supervisory bodies and weaken the legal system to reduce checks on presidential power.
Sheinbaum said Monday she supported submitting all of López Obrador’s reforms when Congress returns in September. Sheinbaum even added a few more unfunded benefit programs to the list of proposed constitutional changes.
The peso fell about 1% on Tuesday to close at 18.49 at $1. The Mexican currency has lost about 11% against the dollar since late May, especially after the June 2 elections. Mexican stocks closed Tuesday unchanged, but remain about 4% below pre-election levels.
Sheinbaum belongs to López Obrador’s Morena party, where he is still a much more influential figure than she is, so she has little room to argue for reconsidering or delaying the changes.
López Obrador went further on Tuesday, claiming that the market jitters were caused by a dark conspiracy among Mexico’s elite, rather than legitimate investor concerns.
“They were very used to blackmail,” López Obrador said. “You better keep my privileges because if you don’t, there will be capital flight and there will be a devaluation,” he said, paraphrasing the alleged conspirators.
Never one to shy away from a fight, López Obrador said he was more convinced than ever to push through reforms in September in Congress, where his Morena party won the two-thirds majority needed to pass the amend the constitution. López Obrador will leave office on September 30.
He and Sheinbaum have offered to hold information sessions and discussions to “explain” the reforms, but without offering any possibility that those reforms would change. And many of those who want to attend the meetings – universities and professional organizations – haven’t even heard of the proposed forums.
Rather than urging López Obrador to implement reforms slowly, Sheinbaum added some benefit programs for women and schoolchildren to the list of things she would like to see enshrined in the constitution.
Markets are also concerned about Mexico’s current budget deficit of around 6% of GDP, and payments to Pemex, the country’s debt-laden state oil company.
Mexico also continues to struggle with persistently high inflation of almost 5%, despite high domestic interest rates of 11%. These high government bond yields – along with a surge in remittances – have tended to support the value of the Mexican peso over the past year. But a devaluation like this month’s is likely to worsen inflation.
