The 2024 electoral process will officially begin at the end of November in Mexico.
This period will mark, in a certain way, the guideline also for the country’s financial and economic indicatorsamong them, the exchange rate.
Usually, the peso registers pressures in the last year of each government, for at least 23 yearswhen Mexico’s first political transition took place.
These pressures, translated into depreciations for the peso, replaced the large devaluations of other times, when the exchange rate regime was different, but in essence, the trajectory of the exchange rate registered with each change of government is the same.
Of course now the story could be different, but due to market conditions and the fact that there will be factors next year that will coincide with the elections in the country, such as a presidential electoral process also in the United States, The chances that the peso will lose ground next year increase.
In previous installments we have talked about how the exchange rate fluctuation is due more to external factors than internal ones. However, the electoral process that is about to begin in Mexico may be an internal factor that can put strong pressure on the exchange rate.
Depreciation history
In the year 2000, with the first major political transition in the country in more than 70 years, the then president Ernesto Zedillo Ponce de León, of the PRI, left the presidency in the hands of the PAN member Vicente Fox Quesada, This transition process generated a depreciation of 9.92 percent for the Mexican peso.
Vicente Fox Quesada handed over the presidency of the republic to Felipe Calderón Hinojosawith a depreciation for the peso involved in this process of 10.04 percent. This change of government did not include a political transition since both presidents, the outgoing and the incoming one, were from the same party, the PAN.
But the change represented by the handover of power from Felipe Calderón Hinojosa to Enrique Peña Nieto did mean a political transition, since the latter belonged to a different party, the PRI.
This change meant a depreciation for the peso of 14.36 percent in said period..
In December 2018, Mexico registered the second consecutive transition and the third in this century, when President Enrique Peña Nieto, of the PRI, handed over command to current president Andrés Manuel López Obrador, of the Morena party.
This transition has meant the period of greatest depreciation for the peso without considering the era of large evaluations, with an adjustment of 15.93 percent in the period.
What will happen in this process that is about to begin?
The current president considers the evolution of the exchange rate during his government, characterized by constant appreciation, as an achievement of his mandate.
In fact, it is well known that if the president watches something, it is precisely the trajectory of the peso in the market. This indicator, along with the price of gasoline, are perhaps the most sensitive to his economic policy, judging by the relevance he gives them.
Weight has factors against it
We do not know if the current president will hand over power on October 1, 2024 to the practically certain presidential candidate Claudia Sheinbaum Pardo, who is a member of the party itself; or, if in a surprise the third political alternation in a row and the fourth of this century will be registered and Xochitl Gálvez Ruiz will end up coming to power, who will almost certainly be the standard bearer of the coalition made up of the opposition parties.
However, in recent weeks the peso has registered some external pressures, which to a large extent have to do with the performance of rates in the United States.
But it will not take long for the electoral process that the country will register to come into play, so there will be an internal factor that will put pressure on the peso.
The official candidate will represent the continuity and probably the deepening of the current economic policywith the factor of the public deficit inherited by this government, which will necessarily impact the first year of the next head of executive power, whoever they are.
The opposition candidate will, of course, represent a different project.
These two different visions, a country with two totally different projects, are perhaps what worries the markets the most, not because the same thing does not happen in other nations of the world, but because in Mexico they seek (unfortunately) to reinvent the country every six years. .
Will the markets understand that now it will be different if the official candidate continues ahead in the polls? Will they perceive that with the same project the growth potential will remain the same as always?
ANALYSIS: The ‘counterattack’ of the dollar against the peso is coming
Will the markets have to evaluate a new economic policy?
There are many doubts that will come into play in a few weeks; Also, at the beginning of the electoral process, we will even have to know the first outlines of the economic program of the candidates best positioned to reach the presidency, another factor that the markets will evaluate.
All of the above, without taking into account the “electoral excitement” in the United States, which will elect its president only 5 months after we do the same in Mexico, and barely a month after the first female president has almost certainly taken office in the history of Mexico.
Definitely, everything indicates that the peso will once again reflect all the uncertainty that, for decades, even since at least the last quarter of the last century, has resented an electoral process in which a new president is elected.
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