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 Business News | October 2005 
López Obrador Reaching Out to Business Class
 Thomas Black - Bloomberg News
| | The front-runner in the presidential polls is working to ease foreign investors' fears over his economic policies. |
Mexico's leading presidential contender Andrés Manuel López Obrador, the former mayor of Mexico City, tells voters the government will protect them "from the cradle to the grave." His chief economic adviser, Rogelio Ramírez de la O, is delivering a different message aimed at investors and business leaders: López Obrador isn't a populist and will limit spending to keep the country's deficit from ballooning.
"With Rogelio, he's telling the world he's not going for any crazy schemes," said Mexico Citybased Alfredo Thorne, chief Latin America economist for JPMorgan Chase & Co., who has known Ramírez since 1995.
López Obrador, 51, is seeking to attract support from business leaders to sway voters before next year's election. His Democratic Revolution Party (PRD) won less than 20 percent in the last contest. López Obrador may win 47 percent of the ballots, according to an Institute of Marketing and Opinion poll of 1,489 potential voters taken in July.
Ramírez, a 57-year-old graduate of Cambridge University in Cambridge, U.K., has ties to executives through memberships on the boards of Grupo Modelo SA, the nation's largest beermaker, and insurer Reaseguradora Patria SA. Ramírez gained credibility with foreign investors by warning the peso was overvalued just before a 1994 collapse in the currency.
"The deficit as it is won't increase," Ramírez said in an interview at his home in the Lomas de Chapultepec area of Mexico City. "There's no point in denying that the fiscal policy has been good in terms of fiscal deficit targets." López Obrador would keep the deficit equivalent to less than 1 percent of gross domestic debt, cap spending on new social programs at about US7 billion and encourage private investors to finance new initiatives, Ramírez said.
López Obrador is following a similar strategy as Brazilian President Luiz Inacio Lula da Silva, a former labor leader whose populist positions alarmed investors before he was elected in 2002. Lula, 59, named Henrique Meirelles, a former FleetBoston Financial Corp. banker, to be central bank president.
Investors, such as Luis García of Monterrey-based Investra Consultores, are wary of López Obrador because he has opposed opening the energy industry to more private investment. Investors want to hear López Obrador, who blocked oil wells in his home state of Tabasco to protest alleged vote fraud, give more details on his economic platform, García said.
"We all try to answer the questions for him and we begin to make assumptions," said García, chief executive of Investra, which manages US650 million of debt and equities. "The assumptions aren't good, but they're the consequence of a lack of answers."
Higher Credit-Rating
On his web site and in speeches, López Obrador pledged to pay a pension to all adults older than 70, guarantee minimum wage increases, provide universal healthcare and begin to pay "the historic debt" Mexico has with the country's Indians.
Investors are looking for assurances Mexico won't devalue the currency, as it did at the end of every president's six-year term from 1982 through 1994. President Vicente Fox's spending limits helped push down annual inflation to a record low of 3.5 percent in September from 9 percent in 2000.
The reduction in the deficit was one reason Standard & Poor's lifted Mexico's foreigncurrency rating three times since 2000 to BBB, the second-lowest investment grade rating. The yield on Mexico's benchmark 30year bond has fallen to 6.51 percent from 8.95 percent in August 2001.
Ramírez said he told economists at JPMorgan, Credit Suisse First Boston and Goldman Sachs Group Inc. that López Obrador would control spending to ensure the budget deficit remains within goals set by Fox's administration. |
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