Mexico Votes to Check AMLO’s Power, Trims His Party’s MajorityBy Alejandro Valerio | Fri, 06/18/2021 - 09:00
On June 6, Mexico held its largest elections in recent history, in which more than 20,000 public officials were elected, including 15 out of the 32 governorships. Five hundred seats in the lower house were contested. As FrontierView projected, Mexico’s ruling party, MORENA, won most of the governorships but fell short of winning an absolute majority (above 333 seats) in the lower house, thus losing the power to enact structural reforms with potential disrupting effects for the operating environment.
MORENA, under the wing of its leader, President Andrés Manuel López Obrador (AMLO), is poised to win 11 out the 15 governorships, increasing its domain at the state level. However, the impact of the triple crises affecting Mexico (sanitary, economic, and security) took a toll on AMLO’s and MORENA’s standing in the lower house.
According to preliminary results, MORENA and its allies, the Green and Workers parties, in the coalition Juntos Hacemos Historia are expected to gain 279 seats in the lower house, decreasing from the 311 seats won in 2018. The opposition, gathered this time under the umbrella of the coalition Va por México, is expected to gain 197 seats, and coupled with the surprising results obtained by Movimiento Ciudadano (24 seats), will be able to balance AMLO’s policy agenda in Congress.
Our view: The fact that AMLO’s power was trimmed in the lower house all but certainly will limit his ability to enact structural reforms without the opposition’s consent. This is good news for investment, the weakest link of Mexico’s GDP, as investors have been wary of AMLO’s policies, particularly toward the energy sector. Thus, we are likely to see a new political landscape, where the federal government will continue to have significant leeway, albeit less than the first years of the sexenio, to push forward its economic policy, mainly focused on social programs and key infrastructure projects in the energy sector. According to the preliminary results, MORENA might have enough votes to continue passing the federal budget (which is approved with a simple majority of 251 votes) contingent upon the Green and Workers parties’ votes along the same lines.
Business implications: Firms should continue adjusting their government engagement strategy at the federal and state levels, as new authorities at both levels will shape public policies and government spending priorities for the rest of the sexenio. Furthermore, firms should start mapping out key advisers of the new governors and key figures in the lower house on economic and regulatory matters.