Investors are concerned about the future of the rule of law in Mexico

Sheinbaum told local media Thursday night that any reform must be properly evaluated and explained to the Mexican people.

While the fate of checks and balances looms as a key issue for many investors, others are also eager about plans to boost retirement and other social benefits at a time of already heightened concerns about the once-frugal López Obrador’s spending on the election year.

According to the Government’s estimate, Mexico’s fiscal deficit will end 2024 at 5.9% of the Gross Domestic Product (GDP), which would be the country’s highest since the 1980s.

While it may be compelling for López Obrador to spend more on universal pensions, health care and education, the costs and fiscal constraints could complicate this, said Aaron Gifford, senior sovereign emerging markets analyst at T. Rowe Price.

“Still, with the budget deficit where it is, markets are worried about a fiscal slide even despite Sheinbaum’s promise to be fiscally responsible,” he said.

Some still hope that Sheinbaum, like López Obrador during most of his six years in power, will end up spending moderately.

The 2024 budget “was quite political in the sense that it was intended to provide fiscal space for (López Obrador) to complete a number of pet projects,” said Damian Buchet, chief investment officer at London-based Finisterre Capital.

“But after that, Sheinbaum has already signaled that, without being called fiscal adjustment, he would actually return to fiscal orthodoxy,” he said.

Another question is whether Sheinbaum will emulate López Obrador’s tendency to meddle in various aspects of the economy, from mining to energy and water, to a partially built airport near Mexico City that was canceled early in his term, and whether the checks and balances that delimited his power will survive the legislative sessions that begin in September.

“The big issue is the rules of the game, the rule of law, that the rules can be followed,” said Gutiérrez of Franklin Templeton, noting that the markets were particularly nervous about the idea of ​​​​electing judges and magistrates through popular vote.