Final Seat Allocations Confirm Obstacles To AMLO's Agenda In Mexico

• The final seat allocations for the next term of Mexico’s Chamber of Deputies did not differ significantly from preliminary estimates, supporting Fitch’s view that President Andrés Manuel López Obrador’s agenda will be constrained moving forward.
• While AMLO’s Morena party remains the largest in the Chamber, its losses in June’s mid-term vote will force it to rely on allies to pass legislation. This will give these smaller parties significant leverage.
• AMLO’s government has signaled that it will submit a fiscal reform in September, which will be relatively modest in scope. The government will also submit its 2022 budget proposal in the coming weeks.
• Fitch Solutions reiterate that Morena’s losses are generally positive for economic confidence. Tax reform and the 2022 budget are likely to provide clarity around the new legislative dynamic in the coming months.

(Source: Fitch Solutions)