Final voting results released over the weekend showed Mexico's left-wing ruling party and its allies set to secure a majority in Congress, potentially enabling the alliance to pass sweeping changes to the constitution.
Official vote counts from last week's elections show the Morena party and its partners appear on track to win an absolute two-thirds majority in the lower house of Congress.
In the Senate, the coalition appears to be unable to secure an outright majority, but the margin is narrow, analysts say, meaning it will likely only need to attract the support of a handful of opposition lawmakers to amend the constitution. Party President Mario Delgado said in an interview that building those coalitions is “relatively easy to achieve.”
Mr Delgado added: “We are now a dominant force and this is the people’s decision.”
The final makeup of the legislature remains unclear because some seats in Mexico's Congress are appointed in August through a system of proportional representation. Legal challenges could also affect how seats are allocated.
But Morena’s near-total dominance has triggered a backlash from one area the party cannot ignore: financial markets.
Investor panic was on full display in the turbulent days following the election, with Mexican stocks battered and the peso suffering its worst week since the pandemic.
Financial analysts say the concern is that the Morena party could use its broad powers to enact constitutional changes that critics warn could weaken existing checks on presidential power.
The proposals, first floated by Andres Manuel Lopez Obrador, include plans to eliminate independent regulators and appoint judges and election officials through popular elections, which critics warn could make them more vulnerable to political pressure. Investors worry that subverting the judiciary could raise other concerns. Might make it less certain They can get a fair hearing in disputes.
“The feeling in the market is that with this plan, under Morena’s party, a radical change could be coming,” said Janneth Quiroz Zamora, head of economic research at brokerage Monex. “The biggest concern is that checks on executive power could be removed.”
Last Monday, the new president, Claudia Sheinbaum, a close confidant of López Obrador, announced that current Finance Minister Rogelio Ramírez de la O, seen as a stabilizing force, would remain in office, a move that appeared to be aimed at calming markets.
“He was an excellent public servant who ensured good financial and economic management,” she said.
Sheinbaum won the presidency with the highest percentage of votes in decades, and Morena won most of the governorships.
Blanca Heredia, a Mexico City political analyst, said investors were encouraged by her initial comments that “the government was sensitive to their concerns.” Heredia said that was “mainly because of the speed of the response,” noting that the new president “needs and wants economic growth.”
But on Thursday, Ignacio Mier, the leader of the Morena party in the lower chamber of Congress, appeared to announce that the party would seek approval of constitutional changes in September before López Obrador steps down and Scheinbaum takes over.
The peso fell again. A few hours later, Meyer walked back his comments on a radio show, saying no changes would be hastily made.
Ms. Sheinbaum later told reporters that the measures would be discussed extensively. She also posted a photo of herself meeting with executives from investment firm BlackRock. “They are committed and enthusiastic about increasing their investment projects in Mexico,” she said on social media.
Delgado, the party chairman, said López Obrador and Sheinbaum needed to agree on how to move forward with the plan.
“These reforms will need to be debated, their scope and final form will be determined in Congress, and the pace of their approval will be determined by the president,” he said, referring to Sheinbaum.
As a result, analysts say, markets could become a moderating force in a political system where one party has so much control.
“I do think that this negative market reaction will cause the government to completely rethink what and how it will approve legislation in September,” said Joan Domene, senior Latin America economist at Oxford Economics in Mexico City.
López Obrador, however, appears undeterred. At his regular news conference Friday morning, the president reiterated his commitment to reform and appeared to downplay the peso's fall, saying “justice comes before the market.”
Analysts said the mixed messages suggest investors’ influence will depend on whether leaders of Morena’s party, including López Obrador, actually listen to them.
“The market is a yoke to politics,” he said. “But it doesn’t treat everyone the same.”
Emiliano Rodriguez Mejia Miriam Castillo contributed reporting.
