The Mexican peso experienced further weakening on Tuesday as Mexico's outgoing president and his successor reaffirmed their commitment to implementing around 20 constitutional changes that have unsettled investors.
The newly elected president, Claudia Sheinbaum, has been working to reassure markets while standing firm on a controversial proposal to subject judges and justices to elections. She emphasized that investors should not be worried and assured them of legal certainty in Mexico.
Critics have raised concerns that President Andrés Manuel López Obrador aims to dismantle regulatory bodies and weaken the judicial system to consolidate presidential power.
Sheinbaum announced her support for presenting all of López Obrador's reforms to Congress upon its return in September, including additional benefit programs. The peso depreciated by approximately 1% on Tuesday, closing at 18.49 to $1, marking an 11% decline against the dollar since late May.
Despite market fluctuations, Sheinbaum, a member of López Obrador's Morena party, faces limitations in challenging the proposed changes. López Obrador dismissed market concerns as a conspiracy orchestrated by Mexico's elite to maintain their privileges.
López Obrador reiterated his determination to advance the reforms in Congress, leveraging Morena's two-thirds majority. He accused detractors of resorting to fear tactics to impede progress.
Both leaders offered to conduct informational sessions to elucidate the reforms, with no intention of altering the proposals. However, key stakeholders such as universities and professional organizations remain unaware of these forums.
Market apprehensions extend to Mexico's substantial budget deficit, equivalent to 6% of GDP, and financial obligations to the debt-ridden state-owned oil company, Pemex. The country grapples with persistent inflation near 5% despite elevated domestic interest rates of 11%, which have historically supported the peso's value.
The recent devaluation is likely to exacerbate inflationary pressures, posing challenges for the economy moving forward.
