Electoral impact on the Mexican market

The recent weakening of the Mexican peso against the dollar has been one of the main consequences of the election results in Mexico.

Following the results that favored the Morena party and its allies, the peso closed at its weakest level since November 2023, moving from the 16.90 pesos per dollar range to the 17.70 range.

This depreciation reflects market concerns about the country’s possible economic and political direction under the new administration.

Claudia Sheinbaum has been elected as Mexico’s new president, marking an important milestone in Mexican politics. Alongside her election, Morena is on track to secure a supermajority in Congress, giving them significant control over the legislative process.

This concentration of power has been one of the leading causes of market uncertainty, as it could facilitate the implementation of constitutional reforms.

The impact on the stock market was immediate and severe. Mexican stocks fell more than 6%, with the Mexican stock index registering a 6.1% drop.

This abrupt decline reflects investor nervousness about the country’s economic future under the new administration. Companies, significantly those reliant on international trade and foreign investment, could be negatively affected by any changes in economic policies.

The main concern of the markets is that Morena might implement constitutional reforms that are unfavorable to the economic and business environment. The reforms could include changes in regulation, fiscal policies, and other aspects that directly affect investor confidence. This uncertainty regarding the legal and regulatory framework creates a cautious environment among economic actors.

Claudia Sheinbaum has promised to continue the social welfare policies implemented by her predecessor, Andrés Manuel López Obrador. However, she faces significant economic challenges that could complicate her administration. Balancing welfare promises with financial stability and investor confidence will be crucial to avoid further market declines and significant peso devaluation.

In conclusion, the election results in Mexico have triggered an adverse reaction in the financial markets, with a significant stock decline and peso weakening. Uncertainty over possible constitutional reforms under the Morena government and Claudia Sheinbaum has generated fear among investors. The new administration must navigate carefully to maintain economic stability while implementing its welfare policies.