For the financial group BofA Merrill Lynch, the loss of support for the president would limit constitutional changes and help institutions to stop them
MÈXICO, May 12, 2021 (FORBES).- The Bank of America Merrill Lynch Global Research (BofAML), one of the three largest financial groups in the United States, points out that the scenario in which Morena and allies lose the qualified majority in the Chamber of Representatives is positive for the Mexican economy since this would limit the ability of President Andrés Manuel López Obrador to modify the Magna Carta.
“We believe that the loss of support for AMLO in the midterm elections would be constructive for the economy, as it would limit constitutional changes and encourage institutions, such as the courts, to contain more changes. Even more importantly, once the elections are over, the biggest source of political uncertainty this year will be eliminated and the dominant issues for the Mexican economy will be growth in the US and Covid”, it is mentioned in an analysis they made.BofA
In the document entitled “Intermediate elections in Mexico”, he assures that his base scenario for the intermediate elections of this June 6 is that Morena will end up with less than 51% of the total votes in Congress -mainly due to the new rule of thumb. 8% overrepresentation – and that the coalition of Morena, PT, PVEM -Juntos Haremos Historia- will probably lose the qualified majority, but will remain with the simple majority; that is, over 50% of the total seats.
The report mentions that in these elections it is at stake whether López Obrador will have support to consolidate his Fourth Transformation from the Chamber of Representatives or if his agenda is contained since the legislative precinct of San Lázaro is where the budget has been approved and the reforms to both secondary laws and the Constitution that the federal president has implemented.
He explains that the scenario where Morena and allies lose a qualified majority could materialize given that López Obrador will not be on the electoral ballot as in 2018; It is expected that there will be greater participation in the Bajío and Northern Mexico region than in the elections of three years ago; for the potential “useful vote” / protest votes against the president, this after a major economic contraction more severe in the last 50 years.
As well as the new rules approved by the National Electoral Institute (INE) to prevent overrepresentation from being greater than 8%, and undecided voters who can oppose Morena and his coalition, therefore, mention that historically, undecided voters tend to vote against the ruling party.
“Less support for AMLO’s agenda would allow Mexico to benefit more from the growth of the United States. Eliminating the uncertainty beyond the elections would also help. Therefore, we changed our GDP growth forecast to 5% from 4% by 2021 and to 2.5% from 2.0% by 2022, ″ the document states.
He mentions that until now President López Obrador has been able to change the Constitution and other laws to weaken or the structural reforms approved during the administration of Enrique Peña Nieto, such as education and energy.
“The political uncertainty that such changes have generated have negatively impacted on investment and, most likely, on Mexico’s growth potential (investment was reduced by 11% in terms in July 2018 – December 2020 compared to two and a half years earlier) ”, it is mentioned.
He considers that if AMLO maintains his qualified majority in the Chamber of Representatives, he will retain the ability to change the Constitution and deepen the changes during the second part of his administration from 2021 to 2024. This, he mentions, will possibly hinder investment and investment increase.
“AMLO would have a stronger mandate to pursue his agenda and the second half of his term would likely look very similar to the first half (status quo), with low growth following further weakening of institutions and more political uncertainty in the future. context of a strict fiscal policy, with the risk of further constitutional changes that could further hamper investment and potential growth ”, emphasizes.