Therefore, in a first nod to the markets, Sheinbaum tried to put a cold shoulder after the approval of the judicial reform.
“We will promote public investment and private investment. I say it very clearly: rest assured that the investments of national and foreign shareholders will be safe in our country,” he said.
The first president in Mexico’s 200-year history takes office in a country with an economy that has barely expanded, immersed in a spiral of violence linked to organized crime and with the highest fiscal deficit since the 1980s.
The first months of his administration could be highly volatile for local financial markets due to the November presidential votes in the United States – Mexico’s neighbor and largest trading partner -, especially if former President Donald Trump wins.
In addition, the market will closely follow the presentation of the incoming Government’s first national budget before November 15, to analyze whether it will be able to fulfill the promise of reducing the fiscal deficit to 3.5% of the Gross Domestic Product (GDP) from 5.9%. estimated for the end of this year.
Sheinbaum offers fiscal discipline
In her first speech as president, Claudia Sheinbaum offered fiscal discipline, autonomy of the country’s central bank and promoting the relocation of companies during her six-year term. In addition, he assured that national and foreign investments are safe in the second largest economy in Latin America.
He called on everyone to reflect: ”Let’s evaluate with hard data what happened in these six years and with them answer: how did 9.5 million Mexican men and women get out of poverty? How is it that without raising taxes, inequalities were reduced? How are we less in debt and with a strong currency? How is there more well-being? How is there a record of investments? “I change the model of the country.”
Sheinbaum said that Mexico is going through a profound transformation, called “Mexican humanism.”
In addition, Sheinbaum sent messages to businessmen and members of the Judiciary. He told the former that investments will be safe in the country. He asked the latter for peace of mind, since their rights will be respected in the face of the reform.
”Corruption in the Judiciary will end. The people will decide. How is it going to be authoritarian to let the people decide? In a few years we will all be convinced that it was a good reform,” he said.
Uphill
During his term, which began in December 2018, López Obrador doubled the minimum wage, reduced poverty and unemployment, expanded the base of social programs and oversaw the strengthening of the peso MXN=, successes that boosted his popularity and helped Sheinbaum to win a landslide victory in the June elections.
But beyond his promise of “continuity with change,” Sheinbaum inherits a large budget deficit and a GDP that, in real terms, expanded by just 0.9% during López Obrador’s government. According to experts, the second largest economy in Latin America will have to implement some type of tax reform that increases tax revenue.
However, Sheinbaum herself has said that she does not have a “deep tax reform” in mind; on the contrary, she maintains that she will seek to reduce bureaucracy and improve the efficiency of tax collection at customs, among other proposals.
“It will have to carry out an important fiscal consolidation if it wants to maintain the positive view that the markets have of it today,” said Bernardo Keiserman, economist at the Bradesco BBI investment bank.
“We believe that the Government is committed to an adjustment, but achieving one of sufficient magnitude is not going to be an easy task. The economy is weaker and is likely to weaken further,” he added.
The central bank recently cut its GDP growth forecast for this year to 1.5% from 2.4% previously and lowered its estimate for 2025 to 1.2%. In addition, the incoming administration receives a heavy burden from the highly indebted state oil company Pemex.
