With disappointment in Pena Nieto, political risk is on the rise in Mexico

President Pena Nieto's popularity languishes as progress slows on reforms.
President Pena Nieto’s popularity languishes as progress slows on reforms.

By Dan Bogler / Financial Times

Sweeping, radical, audacious. Those are all good descriptions of the structural reforms enacted by the Mexican government over the past three years. Failure, unfortunately, is another.

Economic growth, rather than accelerating back to 4 per cent and more annually, has stumbled along at barely over 2 per cent. The stock market has flatlined, while the peso has steadily lost ground, and not only against the dollar.

All this has turned international investors from enthusiastic backers of President Enrique Peña Nieto and his program of energy, telecom, media and fiscal reforms into critics who are dumping their Mexican assets.

Yet fund managers are not nearly as negative as the president’s own compatriots.

Half think the government’s reforms are harming the country and 60 per cent say the peso’s depreciation is the administration’s fault, according to a recent opinion poll. Add in the failure to deal effectively with crime and corruption and it is little surprise that nine out of 10 Mexicans have little or no confidence in political parties, while six out of 10 say they are not living in a democracy.

In other words, Mexico looks ripe for the rise of a Donald Trump-style anti-establishment candidate. And this is the growing political risk identified by Medley Global Advisors, a macro research service owned by the FT, after a recent country visit.

The focus is the 2018 presidential election and while that is still two years away, MGA sees headline political risks — and the associated market volatility — starting to increase from this year and building steadily throughout 2017.


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