20180604-法国巴黎银行-Mexico__Reforms_at_risk__9页_546kb

Summary of "Mexico: Reforms at risk?"

Core Content

This document analyzes the likelihood of structural reforms being rolled back or modified under the potential administration of Andrés Manuel López Obrador (AMLO) in Mexico, based on recent election trends and political dynamics. The focus is on fiscal policy, the energy sector, and the broader implications for governance and economic policy.

Main Points

• Structural Reforms and Congressional Approval:
  Reversing structural reforms in Mexico requires a two-third majority in Congress. AMLO's coalition, while expected to gain significant representation, is unlikely to secure this majority. Therefore, a complete reversal of reforms is improbable.

• Energy Reforms at Risk:
  The energy sector, particularly oil auctions and the implementation of the energy reform, is more susceptible to changes due to the government's ability to influence agencies and contracts. AMLO may attempt to modify the energy reform by altering the terms of contracts and creating obstacles for implementation.

• Fiscal Policy Vulnerability:
  Fiscal policy is at risk of gradual erosion if Congress is controlled by political forces less committed to fiscal responsibility. The current framework is designed to limit abrupt changes, but this could be undermined if AMLO's coalition gains a strong majority.

• AMLO's Coalition Strength:
  Polls indicate that AMLO's coalition is gaining momentum, with an average of 45% of voting intentions in Congress as of May 2018, up from 35% in Q1. The coalition is projected to secure an absolute majority in the Lower House with a probability exceeding 80%.

• Senate Prospects:
  MORENA, AMLO's party, is expected to win control of the Senate, with the potential to secure around 70 seats if it wins in 24 states. This would increase the chances of AMLO's agenda being implemented with less legislative resistance.

• MORENA as a Catch-All Party:
  MORENA is becoming a broad coalition, drawing support from former members of the PRI, PAN, and PRD. This expansion could strengthen AMLO's political position and enable him to push his reform agenda more effectively.

• Monetary Policy Autonomy:
  The government's ability to appoint board members of autonomous entities, such as Banxico, is limited. The current administration has pledged to respect Banxico's independence, reducing the risk of direct interference in monetary policy.

• Checks and Balances:
  An overwhelming victory for MORENA would reduce checks and balances, allowing AMLO to implement his agenda with more authority. However, the two-third majority requirement for major reforms remains a significant barrier.

Key Information

• Electoral Projections:

  • AMLO's coalition is projected to gain a majority in the Lower House with over 80% probability.
  • MORENA could secure around 70 seats in the Senate if it wins in 24 states.

• Reforms at Risk:

  • Fiscal policy and the energy sector are most vulnerable to changes.
  • Structural reforms require a two-third majority in Congress, which is unlikely to be achieved.

• Government Influence:

  • AMLO may influence the implementation of reforms through control of agencies and contract revisions.
  • He has the authority to appoint new CEOs for key state-owned firms.

• International Agreements:

  • Trade agreements, including a potential renegotiated NAFTA, do not require congressional approval but still need Upper House debate and sanctioning.

• Legal and Regulatory Context:

  • The document is a marketing communication and not investment research.
  • It contains information that may be subject to conflicts of interest and is not intended as financial, legal, or tax advice.
  • The content is based on public sources and may not be independently verified.

Conclusion

The document suggests that while AMLO's coalition is likely to gain a strong majority in Congress, the reversal of structural reforms is improbable due to the two-third majority requirement. However, the government may influence the implementation of reforms, particularly in the energy and fiscal sectors. The potential consolidation of power by MORENA could lead to a more centralized political environment, reducing checks and balances and enabling a more direct imposition of AMLO's policy agenda.