Six months after winning the presidential race with 53% of the votes, Andres Manuel López Obrador (AMLO) started his six-year term on December 1. After giving his inauguration speech at Congress, AMLO delivered a longer speech at Mexico City’s Zocalo (square), in front of 150,000 people. AMLO emphasized the need to strive for austerity, fighting corruption and crime, developing the oil and tourism industries, investing in public infrastructure, developing social programs, and increasing economic cooperation with the U.S. and Canada. Additionally, he stated that he will not raise taxes and energy prices beyond inflation levels, and that government spending will not surpass revenue, further respecting the independence of Mexico’s Central Bank. On November 27 AMLO announced that he would not carry out expropriations nor be indifferent to the business community.
Although AMLO has repeatedly stated that his reforms will be funded with savings stemming from austerity measures, results will be dependent on the timing and scale of infrastructure projects. In view of ongoing disputes with the business sector surrounding construction of Mexico City’s New International Airport (NAICM) and other works, large-scale investments are unlikely to materialize during the first six months of his administration. Coupled with a perceived populist agenda hard to yield prompt results, AMLO is unlikely to attract capital to finance Mexico’s oil industry, especially given comments threatening private capital in the sector. Moreover, the markets are seemingly reflecting lack of confidence in his ability to manage the Mexican economy. This assessment is backed by potential ruptures within his coalition, which despite holding a majority in both houses of Congress, features left-leaning and market-oriented elements with opposed views. That said, AMLO is likely to pursue amicable relations with the U.S., thereby signing the new North American trade treaty (USMCA) slated to replace NAFTA.