Mixed signals will undermine business trust in Mexico

Subject

AMLO and business.

Significance

President Andres Manuel Lopez Obrador (AMLO) announced on February 18 the creation of an Investment, Employment and Growth Promotion Council. Led by his chief of staff, Alfonso Romo -- the agroindustry businessman who oversaw relations with business groups and investors during AMLO’s 2018 presidential campaign -- the council aims to improve relations between the public and private sectors with a view to doubling economic growth to 4% by the end of the administration's term in 2024.

Impacts

• Businesses will welcome Romo’s return as a more prominent player within the administration but he has yet to prove his leverage with AMLO.
• The government’s discourse against the neoliberal economic model will continue to buttress AMLO’s support in the short-to-medium term.
• If AMLO continues to put infrastructure projects at the mercy of public consultations, investors will become increasingly wary of Mexico.
• In the long term, without tangible improvements in living standards, the government’s popularity will decline despite its rhetoric.
• Standard and Poor’s lowering of Mexico’s sovereign outlook on March 1 points to a possible rating downgrade, which would weigh on growth.