MEXICO CITY (AP) — Mexico’s president has vowed to continue with judicial reforms that made investors nervous, and suggested that remittances would bolster the country’s economy.
President Andrés Manuel López Obrador discounted the 7% drop in the value of the peso against the US dollar in the week following Sunday’s elections and said Mexico’s economy was solid. He predicted that this year Mexico would see a record US$65 billion in remittances, the money sent home by migrants working abroad.
López Obrador acknowledged that markets were nervous about a judicial reform he plans to implement that would see all judges run for election. He said this was because big companies were worried about losing judges who he said protected them.
López Obrador blamed shadowy elite forces he called “promoters of nervousness” and accused them of undue influence in the current legal system, where judges are appointed or approved by legislators.
“There are judges who are employees of large corporations,” López Obrador said at his morning press conference. “They have some judges on their keychains.”
Analysts say the president is angry about this the country’s judiciary blocked several of its previous reforms because they were considered unconstitutional.
López Obrador’s Morena party won a two-thirds majority in Congress, which would allow them to pass changes to the Constitution such as judicial reform, as well as mandates for a series of yet-to-be-funded government benefit programs.
He promised to continue pushing for 20 constitutional changes, including one that would undo the country’s current system of individual retirement accounts and eliminate most independent government oversight and regulatory agencies.
But markets are also concerned about Mexico’s current budget deficit, equivalent to about 6% of GDP, and payments to the country’s debt-ridden state oil company, Pemex.
Mexico also continues to struggle with persistently high inflation of almost 5%, despite high domestic interest rates of 11%. These high returns on government bonds have also tended to reinforce the value of the Mexican peso over the last year.
López Obrador has already boasted about the strength of his weight and a reduction in the number of Mexicans living in poverty (Although extreme poverty has increased.) But experts say the peso’s strength and poverty gains are partly due to the fact that remittances have nearly doubled since 2019 as migrants send more and more money. back to their families.
Remittances increased from around US$36 billion in 2019 to US$63.3 billion in 2023. According to the World Bank, remittances represented 4.2% of Mexico’s entire GDP, a number that is almost certainly higher now.
In the first four months of 2024, remittances increased by 8.3% compared to the same period in 2023.
Markets are also nervous about the ongoing costs of supporting Pemex and the cost of subsidies that will have to continue flowing to the president’s state transportation projects.
López Obrador created a state airline providing subsidized and low-cost tickets. That airline, Mexicana, has about $459 million in projected operating costs and has ordered 20 new planes from Brazil’s Embraer at a cost of $750 million, officials said Friday.
But the company only carries about 1,000 passengers a day. Other projects, such as the president’s Maya Train line, which runs through the Yucatán peninsula, they cost billions and may never break even.
Markets also question how much influence López Obrador will continue to wield after Claudia Sheinbaum the Morena candidate who won Sunday’s electionstakes office on October 1st.
López Obrador had already said he would completely retire from politics when he left office. But on Friday he said he would continue speaking on the phone with Sheinbaum if she called and promised to “continue using my right to dissent, throughout my life.”
