Initial euphoria over Andres Manuel Lopez Obrador’s landslide victory soured as the dollar’s gain jolted investors back to the reality that the country’s first leftist president in recent times may alter its economic model.
The peso declined as much as 1.3 percent after results of the Sunday elections signaled his Morena party was set to enjoy broad support in Congress. The victory came with a commanding lead for Lopez Obrador, showing a strong mandate for his policies. Stocks also slipped, along with the country’s dollar-denominated notes.
Investors are concerned that under Lopez Obrador, the privatization of the energy industry will be rolled back, and spending on social programs will push the country into debt. In a victory speech following the vote, the 64-year-old struck a unifying tone while saying that his government will give preference to the poor. The peso’s drop in the second quarter was the biggest since 2014.
While analysts said it may be a few days before the makeup of congress is clarified, Eurasia Group said Lopez Obrador’s large margin of victory suggests his party would have a strong position in both houses and be able to attract support from smaller parties as well. Among his proposals are a halt to a $13 billion airport project, the rollback of a historic opening of the energy industry and an expansive fiscal program.
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