Mexico – AMLO Popular, but Not Invulnerable

Approaching the two-year mark of his six-year term as president, Andrés Manuel López Obrador (aka AMLO) remains broadly popular, despite a thin record of accomplishments and deservedly poor reviews from critics of his handling of the COVID-19 pandemic and the related economic difficulties. While a sizeable portion of the electorate clearly views AMLO with something approaching devotion and will never lose faith in him, he nevertheless remains vulnerable to an erosion of his popularity as the country gears up for mid-term congressional elections in mid-2021.

Delivering his second state of the union address on September 1, AMLO declared that Mexico had weathered the crisis and predicted a V-shaped recovery. However, the rebound from a steep economic contraction in the second quarter was disappointing, and is likely to lose momentum as setback for the US economy, the result of a surge in COVID-19 cases and the failure of Congress to approve a second emergency stimulus package, negatively affects Mexico’s fourth-quarter economic performance.

It is difficult to reconcile the very bleak economic outlook with an election scenario that is favorable for the incumbent administration, even if AMLO somehow manages to maintain a high personal approval rating over the next seven months. Likewise, polling data consistently indicates that a majority of respondents are dissatisfied with the government’s performance in battling the perennial problems of deadly crime and corruption.

AMLO’s MORENA controls an outright majority of seats in the lower legislative chamber but depends on the backing of the PT and the environmentalist PVEM to ensure its claim to a majority in the Senate. Were the governing coalition to lose its claim to majority support in the Congress, the risk of debilitating political dysfunction would increase significantly, and recognition of that danger would likely result in damaging market volatility that would reinforce the structural impediments to reviving an exhausted economy.

Since 1979, The PRS Group Inc., has been a global leader in quant-based political and country risk ratings and forecasts. This commentary represents a sneak peek from our upcoming political risk reports. For more information please contact us at (315) 431-0511 and sales@prsgroup.com, or explore a subscription to PRS Online and/or ICRG Online today to receive political risk updates.

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