Category Archives: Political Risk

Overall, the Mexican peso has had a relatively good year in 2017, set to close a shade under 20 to the US dollar at end-December (19.72 at time of writing), having opened at the year at 20.74. This would make for a gain of about 5% for the year.

At the beginning of the year, the peso was still reeling from the election of Donald J. Trump as President of the U.S. on a platform hostile to imports of goods and people from Mexico. There was concern that he may follow through on threats to unilaterally withdraw from NAFTA, tax remittances and build a big border wall, among other measures. It was in the latter stages of a rout which would see the peso climb from a shade under 18 to the dollar in mid-August 2016 to an all-time high of nearly 22 in the third week of January 2017.

A strong nine-month run would see the peso more than retrace this move as the worst fears of a Trump Presidency appeared to have been unfounded, with the Mexican currency dipping back below 18 to the dollar during the summer months.

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“May you live in interesting times” is a Chinese curse that seems apt to describe Mexico at its current political juncture. Times are certainly interesting. With the election of Donald Trump in the U.S., much focus in recent months has been outward-looking. Indeed, political risk in the diplomatic sphere is perhaps higher than at any time in living memory.

Domestically, the current administration is on the cusp of its final year in office, and the lame-duck status that goes with it. The pre-campaign to elect a new President in 2018 is well under way, with a very real possibility that Mexico will elect its first ever leftist President. At the same time, recent high-profile incarcerations of former high-level government officials and narco-traffickers has shone a spotlight on corruption and organised crime like never before.

With imminent – and important – state-level domestic elections in June 2017, seen by many as a prelude to the Presidential elections taking place in July 2018, the scope for political and policy change in Mexico over the period to late-2018 is significant. In light of the single term limit on the Mexican Presidency, the incumbent, Enrique Peña Nieto, will give way to his successor on December 1^st, 2018. Opinion polls suggest a three-way fight between Peña Nieto’s PRI, the opposition PAN – which held the Presidency from 2000 to 2012 – and Andrés Manuel López Obrador (AMLO), at the head of Morena, the movement he left the PRD – traditionally Mexico’s 3^rd party, and for whom AMLO twice contested the Presidency – to form.

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Today marks the 75th anniversary of the nationalization of Mexico’s oil industry, exactly one week after President Enrique Peña Nieto celebrated his first 100 days in power.

Mexican Presidents are elected for a single six year term, taking office in December. In modern times, regime change has been associated with economic and political upheaval.

Felipe Calderon’s razor thin victory in 2006 gave rise lengthy street protests and an aggressive militarization of government anti-drugs efforts driven, at least in part, by the newly-elected President’s attempt to assert his authority and establish legitimacy. Continue reading →