Event

Mexico took to the polls on 7 June to renew all members of the 500-seat lower house of Congress and to elect governors for 9 of the country’s 31 states. Despite being marred by violence in some southern states – where powerful teacher unions tried to boycott the election in protest against educational reform and where (public outrage over) drug-related insecurity is most fierce – the voting process was less severely disrupted than many had feared. All in all, only about a hundred out of 128,000 polling stations saw violent incidents and voter turnout was slightly above the average for mid-term elections. In terms of results, the Institutional Revolutionary Party (PRI) of President Enrique Peña Nieto has modest reason to cheer. Though continued security problems and recent corruption scandals caused it to lose a few congressional seats, the coalition with two smaller parties that is headed by the PRI has managed to retain a legislative majority. The failure of the main opposition parties to benefit from the PRI’s unpopularity has much to do with internal strife. As for the political left, many previous supporters of the Party of the Democratic Revolution (PRD) now voted for the new populist party of Andrés Manuel López Obrador, the presidential candidate for the PRD in both 2006 and 2012. The centre-right National Action Party (PAN) had also hoped to do better, even if it consolidated its status as Mexico’s second strongest political force. In particular, it lost much influence in the industrialised northern state of Nueva Léon. There, Jaime Rodríguez became the first independent candidate to win a governorship in Mexico, thus marking the end of the PRI-PAN political duopoly in the state.

Impact on country risk

Importantly, the election outcome implies that political stability seems guaranteed for the remainder of Peña Nieto’s presidential term, which will not end until 2018. Pro-business policies are likely to prevail and the government remains in a strong position to pass laws (see anti-corruption and security measures, and reforms related to the telecom and hydrocarbon sectors). Legislative backing will also facilitate the approval of the 2016 budget, which – given the importance of oil-related government revenues in a context of lower oil prices – might have proven more challenging otherwise. While it is still very early to look ahead to the 2018 presidential elections, a key point can already be made: PRI prospects will crucially depend on the success of the efforts to jumpstart the economy, attract foreign direct investments (though lower oil prices may undermine that goal) and redistribute the benefits of economic growth to all segments of the population. If the achievements disappoint the voters, the recent election outcome indicates that a populist candidate may have a chance of upsetting the political establishment.

Analyst: Sebastian Vanderlinden, s.vanderlinden@credendogroup.com