Election result fails to instil confidence in Mexico

Euromoney Country Risk's scores are showing that sentiment toward Mexico has edged downwards against the backdrop of the general election on July 1, which returned the Institutional Revolutionary Party (PRI) to power with new president Enrique Pena Nieto.

The sovereign’s current score of 57.8 is one point lower than in Q1 2012, pushing Mexico down two places in the rankings to 45, below Panama and Bermuda.

Thailand and Peru, both risers in the ECR survey, are now both pulling on Mexico’s coat tails.



Despite an improved economic assessment in terms of the economic-GNP outlook and monetary policy/currency stability, bank stability has been questioned in light of Mexico’s exposures to Spain. Plus there are similar question marks over the country’s political and structural development, notably relating to corruption, as well as institutional and policymaking risks.

As one of ECR’s contributors, Neil Pyper, senior analyst in international politics at Oxford Analytica, says: “Although the scale of Nieto’s victory gives a clear mandate, there are still structural problems in Mexican politics.”

“The PRI has no majority in congress and the PRD [Party of the Democratic Revolution] is unlikely to cooperate fully. Routine legislation will pass, but it will be difficult/impossible for highly controversial legislation, governing the energy sector for example.”

“Reforms to reduce the dependency of the public sector on oil are only likely to proceed if there is a collapse in oil prices.”

“On top of that there is the problem of the outgoing president failing to recognize the election results, even if this is unlikely to mobilise enough support in a repeat of the 2006 demonstrations.”

“And there is the huge wave of drug violence, though this may encourage the outgoing president into a serious attempt against the cartels before the official change of office takes place in December.”

This article was originally published by Euromoney Country Risk