“Beware the ides of March”, was the famous warning given in Shakespeare’s Julius Caesar about the eventual murder of the renowned general/emperor. Hopefully, nothing as dire as that warning is present in this upcoming date, but we do have the ramp up of the Mexican presidential campaign, which is now officially kicking off after close to nine months of various stages of internal elections and “pre-campaigns”.
March 1st marks the official campaign start, and with it we got the first official poll (in this case by newspaper El Financiero), with incumbent candidate Claudia Sheinbaum leading with 50% of voter intentions, opposition Frente Candidate Galvez showing 33% support, MC candidate Alvarez Maynez at 8%, and 9% undecided voters. At this stage, trends in polls show Sheinbaum holding steady in a 46–52% range, Xochitl has been rising in approval slowly from around 28% to 33%, Alvarez Maynez has been steady in a 8–9% range, and undecideds are falling steadily from around 18% to 9%.
With the launch of official campaigning, we are likely to start gathering more details on specific policy proposals from the candidates. The key points that we anticipate the campaigns are likely to be questioned on include:
- Public Finances: What will be done to solve the inertial large deficit of close to 5% of GDP that the next administration is likely to inherit? It’s not as critical a pressure as it seems at first glance, given the increase in the AUMs of the local pension funds will likely be close in value to the inertial increase in public debt issuance (so there are semi captive buyers for the debt, barring a broadening of the pension funds investment regime), but a tax reform could still be in the cards. The key question is how such a pension reform would be implemented, given the biggest gaps in Mexico’s tax collection are related to informality and VAT collection. Thus, such a reform should be carefully implemented to avoid hurting investment.
- Energy: Power in particular is an increasing risk to Mexico’s manufacturing sector, as 55% of the country’s power output is consumed by manufacturing and current spare generation capacity is near its lowest point in close to 40 years. However, there seem to be some plans to help resolve some of the investment shortfall.
- Water policy: Mexico’s water reserves are currently at critical levels, with some of the country’s water reserves at or approaching all-time lows. Solving this issue will be complex, given water is a constitutional right, and is managed at the municipal level.
One of the major questions on the Morena (the incumbent) front is how much of AMLO’s legacy agenda Shenbaum will support. On February 5th, the bank holiday commemorating the anniversary of the Mexican Constitution, President Lopez Obrador submitted a wide-ranging series of constitutional amendment proposals. The proposed changes affect the political system, the institutional framework as well as the macro environment on several fronts. Some key proposals include: pension system, minimum wage, housing and judicial power reforms, among others. It is unclear if any of them have a material change of being approved in their current form, given Morena and its allies lack the 2/3 majority needed in both houses, but it’s possible some of them could be ratified, potentially with some modifications. Another alternative being discussed by local political analysts is that some of the proposals don’t necessarily target their ratification, but rather seek to put the opposition in a tight spot ahead of the June 6th national/presidential election, by forcing them to reject socially popular offerings.
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