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Populist Candidate Causing Uncertainty in Mexico

Populist Candidate Causing Uncertainty in Mexico

Business leaders, investors, and analysts are divided on possible impact of López Obrador presidency.

At a banking conference in Acapulco, Mexico, on March 9, Andrés Manuel López Obrador, the controversial frontrunner for the country’s July presidential election, again sent mixed signals to the transnational business community with his confusing and contradictory mix of populist and moderate economic proposals.

López Obrador, a 64-year-old veteran of Mexican politics and twice runner-up to the presidency, is currently the favorite for what is likely to be a highly competitive election race. Yet the left-leaning candidate, dubbed by many as a populist, is fond of doublespeak regarding his position towards the country’s recent series of market reforms, notably of the energy sector.

López Obrador will run against centrists José Antonio Meade of the incumbent Institutional Revolutionary Party (PRI) and Ricardo Anaya of the Citizens’ Front alliance in the election. Various polls suggest he already has a considerable lead amid public anger in Mexico over corruption and drug violence.

Mexico passed a landmark reform of its lucrative oil and gas sector in 2014, which opened the publicly run industry to private competition for the first time in 75 years. Yet López, better known as AMLO, has told his passionate base of supporters, many of them drawn from the country’s poor, that he plans to reverse the reform, along with other recent business-friendly legislation.

Political rivals claim AMLO is a potential threat to Mexico’s economic stability, comparing him to former Venezuelan president Hugo Chávez. Analysts differ widely, some believing that the candidate’s bark is worse than his bite and that he would govern fairly moderately as he did during his tenure as mayor of Mexico City in 2000-2005.

At the Acapulco conference, AMLO attempted to reassure the private sector by vowing to respect the autonomy of Mexico’s central bank and ruling out nationalizations of private enterprises. Yet on the campaign trail, speaking in front of crowds of Mexico’s rural and urban poor, his rhetoric has been noticeably more radical.

Nobody quite knows what an Andrés Manuel López Obrador presidency would look like for Mexico, and therein lies the concern for investors. Probably the best and most balanced English-language analysis of him, written by Patrick Iber and Carlos Bravo Regidor, appeared this month in Dissent magazine and paints a decidedly mixed picture.

“AMLO’s greatest strengths are his persistence and popular appeal,” the authors write. “He has correctly identified the most pressing ills that have undermined Mexico… rampant corruption, extreme poverty, regulatory capture, and wasteful government spending. Yet, even if his diagnoses hit the mark, his solutions lack institutional perspective and policy specifics. His movement is afflicted by a great-man theory of history in which a change in leadership will, by itself, turn things around.”