Mexico Election Update

Lynx Fellow Grant Baker

This year, arguably one of the most decisive political elections in recent memory will play out; affecting the economic and political realities of nearly every American. No, this is not the upcoming US midterm election, this election will take place a few months earlier just south of the border in Mexico; though a considerable number of ballots will be cast from within the United States via the Mexican embassy and its consulates. Given Mexico’s role as an important trading partner with the US, as well as its role as a security partner, the political outcomes of this election will have a colossal effect on the daily economic realities of the average American, as well as American businesses (whether they do business in Mexico or not).

This election is shaping up to be a turning point for Mexico; perhaps for better or for worse. Three candidates lead the field for the Mexican presidency: José Antonio Meade Kuribreña, of the Institutional Revolutionary Party (PRI), Andres Manuel Lopez Obrador of the National Regeneration Movement (MORENA), and Ricardo Anaya Cortes of the National Action Party (PAN). Each of these candidates’ respective parties lead a coalition of allied parties competing for not only the presidency, but also for seats in the Mexican Senate and Chamber of Deputies.

Unlike the United States, terms are not staggered in Mexico. Every single seat in the Mexican legislature, and the Mexican Presidency will be up for election on July 1st. Additionally, due to reformsmade under President Peña Nieto’s government, those elected to the Chamber of Deputies (3-year terms), and the Mexican Senate (6-year terms) will be the first in contemporary Mexican history to not be subject to single-term limits, and rather will be able to serve a second term before being term-limited. Because of this, whatever the outcome of this election, it will come to define Mexican politics, and therefore the US-Mexican partnership, for at least the next 3 years, and perhaps as long as the next 12 years.

Politically, this election is far from conventional. Mexico has historically been a de facto single-party system dominated by the Institutional Revolutionary Party (PRI). However, the PRI’s power and influence has continued faded since the 1980s as a constellation of political parties from across the political spectrum have gained traction amid continual PRI corruption scandals. Of these, parties, the Party of Democratic Revolution (PRD), and the Party of National Action (PAN) have most consistently rivaled the PRI.

With the PRI candidate for president, José Antonio Meade Kuribreña, now lagging in third place, it is clear that the PRI’s political dominance is in jeopardy. The PRI has only lost the Mexican presidency twice before; both of those times to PAN candidates (Vicente Fox Quesada in 2000, and Felipe Calderon in 2006), and both of those times they lost their majority in the Mexican congress. As of the most recent poll data(May 4th), Andres Manuel Lopez Obrador, the MORENA candidate for president, leads with 48% of voters stating they would likely vote for him. His nearest contender, Ricardo Anaya (PAN) lags nearly 20 points behind him with 29.8% of voters. The PRI candidate, Jose Antonio Meade, has just 17.2% of voters behind him; a far cry from the days of PRI dominance.

Historically, the outcome of the Mexican presidential election represents the general political direction of the country. Essentially, whichever party wins the presidency will also typically secure a majority in both houses of the Mexican congress.

Knowing this, Obrador’s sizeable lead represents a dramatic turning point for Mexico. While PRI and PAN may have their differences, they are both typically pro-NAFTA, pro-free trade, and very much in favor of overall cooperation and collaboration with the United States. In contrast, Obrador and his MORENA party constitute a dramatic step to the left from these policies.

Obrador founded his party Morena, in 2014; two years after his second failed bid for the presidency. Prior to this, Obrador had been affiliated with the PRD (Party of Democratic Revolution), Mexico’s social democratic party. While Obrador has publicly said he chose to leave the PRD on good terms, it is likelythat he left due to the PRD’s ratification of the 2012 election results (results which he disputed). In forming MORENA, Obrador has sought to create an a far-left populist insurgency, dead-set on upsetting the establishment status quo.

MORENA is very much Obrador’s party. On his webpage, Obradorstatesthat Mexico (ostensibly by electing Obrador and his MORENA colleagues) must put an end to the PRI and PAN oligarchy in order to create a Mexico for the people. He goes on to outline his vision for Mexico, labeling the neoliberal model of economics as a disaster, and stating that the current model of economic development is not sustainable and has done little to develop Mexico.

Tellingly, Obrador’s relationship with the Mexican business community is strained at best. Obrador has made it clear that he is no friend to Mexico’s business community as the “mafia of power.” In response, the Mexican Business Council (CMN), an organization composed of Mexico’s business elite, has been quietly workingto broker a PRI – PAN alliance in hopes of blocking Obrador and his MORENA party from power; with PAN’s presidential candidate, Ricardo Anaya, possibly in talks to meetwith current President Enrique Peña Nieto (PRI), this seems increasingly likely.

While a PRI – PAN alliance would have been unthinkable even a few months ago, it is clear the international response to Obrador’s surge in the polls has triggered a cathartic response in both parties. It’s easy to see why they are so alarmed: the value of the Mexican Peso, the Mexico CDS (indicator of riskiness of Mexican debt), and the Mexican Bolsa’s S&P/BMV IPC (the de facto indicator of the performance of the Mexican stocks) have all plummetedas Obrador has surged in the polls. Given the Peso’s performance as one of the most stable currencies this past year, it’s sudden reversalis indicative of the uncertainty surrounding a potential Obrador presidency. Obrador seems to have taken notice and moderated some of his policies, statingthat if elected he would honor any NAFTA negotiations settled before he assuming the presidency.

However, that is not to say that Obrador has entirely walked back his leftist populist rhetoric and policies. Recently, Obrador statedthat he wanted to make sure that oil (one of Mexico’s largest and most important industries) never falls “back into the hands of foreigners, pledging to end oil exports outside Mexico and instead build oil refineries in Mexico in order to gear oil production towards domestic consumption. This policy would also bar foreign oil companies from drilling in or offshore of Mexico, as well as barring foreign oil imports into Mexico.

Given the US energy trade surplus with Mexico, this policy, and policies like it will dramatically impact the US energy sector. Moreover, its ripple effect will be felt far beyond the US energy sector throughout the US economy and the economy. Obrador’s energy policy is most certainly not a one-off policy. If elected, Obrador and his MORENA party will enact similar policies in other major industries, dramatically impacting those industries as well as the global economy at large.