MEXICO CITY (Reuters) - Leftist outsider Andres Manuel Lopez Obrador won Mexico’s presidential election with a landslide on Sunday, setting the stage for a government that will inherit tense relations with Washington and the scrutiny of nervous investors.
Mexico’s peso whipsawed, first firming sharply before giving up those gains to weaken sharply.
The currency settled back to trade only slightly weaker as investors waited for clarity on whether Lopez Obrador’s party attained a congressional majority, and for signs on where he could take economic policy in Latin America’s No. 2 economy.
“It is difficult to say what the net impact on sentiment will be. On one hand, Lopez Obrador delivered a measured speech, highlighting independence of Banxico and fiscal discipline. He also said he would review oil contracts awarded to private oil companies. On the other hand MORENA would likely get a majority in Congress. My take is that market sentiment will suffer but not too much.”
“If there are no counterweights, the peso might continue to be pressured. But if he is conciliatory it could consolidate at around this level. In the following days, however, the market will concentrate on his plans: the 2019 budget, NAFTA, his communications with Trump, if he is orthodox and pragmatic, etcetera.”
“We have witnessed today a very profound reshaping of the country’s political map and the balance of political forces. The balance of power at the federal and local levels has definitely shifted to the left and the implications of the new political reality for near-term policy direction and for how the different institutions will operate going forward is unclear.”
DUNCAN WOOD, DIRECTOR OF THE WILSON CENTER’S MEXICO INSTITUTE
“Now all our eyes turn to the victory speech tonight – what kind of message does he send out? Does he want to make sure Mexico doesn’t experience any volatility in next few days and weeks? Is he willing to work with other parties to make a better Mexico? If that’s the case, then people will be very reassured.”
“[For U.S. relations] The crucial moment is not what Andres Manuel says – it’s what kind of congratulatory message is sent from Donald Trump or the White House. This is an opportunity to put a reset on the relationship.”
“His emphasis will be greater social and investment spending from savings arising from austere and anti-corruption practices. He has vowed to be austere on the fiscal front, which I think he will comply with at least initially in 2019. I don’t think his speech tonight will address openly financial markets. That’s not his strength. But he will likely be conciliatory and may have some nice gestures for the private sector.”
“The exchange rate appreciated after Meade declared himself a loser, which in some way gives the market peace of mind that there will be no confrontation between the different candidates, and because the exit polls confirm the results of the previous polls.”
“We believe it will continue to oscillate between 19.70 and 20.30 after the elections, but it will depend a lot on what the new president says in terms of public finances and the commercial relationship with the United States.”
Reporting by Mexico City newsroom