AMLO aces Mexican election

Anti-establishment candidate Andrés Manuel López Obrador (AMLO) has won the Mexican presidential election and looks poised to reach a working majority in the country’s Congress. The win has the potential to bring profound changes in Mexico’s economic policy and politics. AMLO’s victory represents a blow to a political establishment tainted by corruption charges, rising crime and persistent inequality, and suggests the forces of populism have not yet peaked around the world.

We expect AMLO’s team to initially sound conciliatory and fiscally prudent notes, and could see Mexican assets rebound a bit from depressed levels caused by political uncertainty and investor worries over a potential dissolution of the North American Free Trade Agreement (NAFTA). In the medium term, we see much hinging on how AMLO will govern. Will he resort to the populist and confrontational stance taken at the start of the election campaign or revert to the more moderate and pragmatic style he displayed as mayor of Mexico City in the early 2000s?