When Andrés Manuel López Obrador (popularly known as AMLO) won a landslide victory in Mexico’s elections in July 2018, his administration obtained a strong popular mandate and sufficient political capital to implement his sweeping legislative agenda. Through future defections and ad-hoc alliances, it could even affect changes to the constitution. Now that AMLO has been in office for his first 100 days, we can begin to examine what the outlook will be for Canadian companies already operating or thinking about investing in Mexico under the new regime.

Despite his massive popularity with Mexican voters, AMLO also has detractors who fear his policies are anti-business and anti-trade. Risks notwithstanding, widespread concerns of a radical regime shift appear to be overblown. For one thing, AMLO just doesn’t have the spare cash to finance a material change in the course of policy. The current fiscal reality in Mexico will constrain AMLO’s ability to make sweeping changes that are offside with the markets. And amid an increasingly challenging global financial backdrop facing emerging markets, relative financial market stability is key to sustaining a sound macroeconomic and fiscal framework and hence economic resilience.

AMLO’s challenges are further compounded by his administration’s bold attempts at tackling deeply ingrained corruption and security issues. Reducing corruption and spiralling criminal violence are highly popular goals among the electorate and badly needed to improve not only the commercial environment, but also institutional and governance quality and socioeconomic outcomes. AMLO’s biggest challenge will be to do so in a way that doesn’t foster an environment of protracted uncertainty, which would limit the large investments needed to meet López Obrador’s ambitious growth target of 4%...

This was excerpted from a 13 March 2019 commentary by Daniel Benatuil of EDC.