Investment Climate in Mexico Deteriorates as AMLO Favours Increasingly Bold Interventions

• Fitch Solutions has revised slightly lower its Short-Term Political Risk Index score for Mexico from 62.9 to 61.3 out of 100, and the Long-Term Political Risk Index score from 56.3 to 55.3, reflecting cuts to the policy-making and characteristics of polity subcomponents respectively. 
• These downward revisions come in response to renewed attempts by President Andrés Manuel López Obrador (AMLO) to increase the role that the state plays in what he views as strategically-important economic sectors and to erode checks and balances on executive power.
• While these initiatives have been long-running features of AMLO’s presidency – reflecting his nostalgia for a more state-centred development model, efforts have been noticeably ramped up in recent months. 
• On May 19, AMLO issued a decree announcing that the army would temporarily seize three sections of a railway operated by Ferrosur (a subsidiary of Grupo México) in the state of Veracruz after the government failed to reach a deal with the firm. AMLO has argued that the seizure was necessary to ensure the timely completion of the Interoceanic Corridor that aims to link ports on Mexico’s Atlantic and Pacific coasts. 
• In addition to these direct actions, the government also passed separate reforms in April that will see the military’s presence in the economy continue to expand and play a bigger role in policing Mexico’s airspace.
• AMLO’s latest actions have undeniably resulted in a further deterioration of the investment climate, reflecting increased risks to the security of private property.
• Notwithstanding, the fact that AMLO’s term in office will end in November 2024 (he is constitutionally banned from running again) should help to contain the lasting damage posed by his populist policies which thus led to the downward revision of the risk indices. 

(Source: Fitch Solutions)