Gradual Weakening of Mexico's Institutions Under AMLO Threatens Investor Sentiment

• Mexican President Andrés Manuel López Obrador (AMLO)’s administration has taken actions in recent months that will weaken investor perceptions of the country’s independent economic and political institutions according to Fitch. 
• This will suppress investment in Mexico over the coming years and has led to a further downward revision of the country’s Long-Term Political Risk Index score. In particular, the President’s efforts to nationalise the electricity sector clashes with the electoral body, personnel decisions at the Banco de México, and a decree fast-tracking major infrastructure projects. 
• The overall trend in policy direction, underscored by these developments, will likely suppress investment in Mexico over the remainder of his term. In the near term, Mexico’s economy will remain highly vulnerable to sharp shifts in investor sentiment driven by further changes to the policy. 
• Over the longer term, Fitch expects uncertainty will keep many investors on the sidelines, particularly in the electricity and oil sectors that AMLO has targeted. Despite investor concerns about his agenda, AMLO remains broadly popular, suggesting that he is unlikely to change course through the end of his term in 2024.

 (Source: Fitch Solutions)