Financial services company Citibanamex has predicted that a victory by Andrés Manuel López Obrador is the most probable result in the presidential election and warned that slower growth, higher inflation and a weaker peso would likely follow.
Company analysts made the forecasts in an April 20 note entitled The April Paradox, citing changes López Obrador has proposed making to key reforms such as energy by reviewing contracts awarded to foreign and private companies and ceasing to award new ones.
“By 2022, the difference would be 0.7 percentage points [in gross domestic product growth], the peso would be 19% weaker compared to the [US] dollar and inflation would be 23% higher,” the note said.
Analysts also said that Mexico’s fiscal deficit would grow and interest rates would rise if the leftist leader of the Morena party wins the July 1 election and takes office in December, which polls suggest is a likely outcome.
“. . . Eventually there will be a significant deterioration in the fiscal accounts, with a large deficit that reaches 4% in our projections by 2022, which would impact on the sovereign credit ratings and drive up interest rates along the entirety of the yield curve.”
Analysts recognized that the other two major party candidates, Ricardo Anaya and José Antonio Meade, “support the continuity of the already operational structural reforms” and therefore would not have the same negative impact on the economy as López Obrador, also known as AMLO.
“The economy under AMLO faces a regime change that we don’t see under Anaya or Meade,” the note said.
The candidate for the “Together We Will Make History” coalition, who according to a recent poll had a 22-point lead over his nearest rival, has also said that he will review contracts for the new Mexico City International Airport project.
López Obrador has threatened to scrap the project altogether, charging that it is corrupt and too expensive.
The International Air Transport Association (IATA) said last week that abandoning the project would lead to a US $20-billion reduction in Mexico’s GDP and the loss of 200,000 jobs.
Source: Milenio (sp)