Precisely, regarding the balances of power, UBS calls for special attention to the role of the judiciary. In November, “the new president-elect will nominate a new Supreme Court justice. Monitoring the Supreme Court’s role as the final arbiter of constitutionality will be key.”
And given that Morena and its allies could achieve a qualified majority in the Senate and the Chamber of Deputies – which gives it legal powers to implement constitutional reforms without the approval of the opposition – UBS is also concerned about the possible “influence of factions most radical members of the party to promote their agenda, such as reforms to the judicial system, the national electoral institute and the pension system”.
This strength of the ruling party for the next six-year term has already had its reaction in the exchange rate, which depreciated more than 3% this Monday. The Mexican Stock Market, for its part, also fell more than 2% at the beginning of this week.
Confidence in the close relationship with the United States
Despite these market fears, investors are confident that the commercial and economic relationship between Mexico and the United States will continue to strengthen under the current government. And, given the new configuration of global production and supply chains, UBS relies on the country’s advantages:
“Mexico has unique advantages in this context: geographical proximity to the world’s largest economy, extensive networks of free trade agreements and a young and trained workforce with a high number of people graduating as engineers and technicians each year,” says the UBS report.
In this sense, he hopes that Mexico will continue to strengthen its place as the United States’ main trading partner. Taking advantage, above all, of legislation such as the incentive for electric cars promoted by Joe Biden and the chip law that could benefit semiconductor production on both sides of the border.
UBS highlights macroeconomic stability
UBS said it is confident that the expansion of Mexico’s economic activity will continue. And observe stability and resilience in the main macroeconomic indicators. In addition, it highlights the role of the Bank of Mexico and the autonomy with which it faces the challenges in terms of monetary policy.
This Monday, the president of Mexico, Andrés Manuel López Obrador, affirmed that Rogelio Ramírez de la O will continue to be in charge of the Treasury, at least during the first months of the mandate of the elected president Claudia Sheinbaum.
Favorable debt structure
Finally, he points out that Mexico’s debt maintains a favorable structure. By representing “a modest” 50% of the Gross Domestic Product (GDP). “More importantly, the vast majority of this debt matures long-term, is denominated in local currency, and remains in the hands of domestic investors (Fig. 3). This very favorable debt structure helps mitigate economic shocks.”
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