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 News Around the Republic of Mexico | July 2006 
Mexico Expects More Vote Protests
 Geri Smith - hispanicbusiness.com
| | Supporters of Andres Manuel Lopez Obrador, candidate for the Party of the Democratic Revolution, attend a rally as he claims fraud in Mexico's elections in Mexico City's main square, Zocalo, in Mexico on Saturday, July 8, 2006. (Kevin G. Hall/MCT) |
Mexico's historic downtown plaza, the Zocalo, has always represented the country's center of power as well as its uneasy mix of cultures.
The plaza is the venue of choice for any group with a major grievance, especially if it involves abuses by authorities against the masses. That's why presidential candidate Andres Manuel Lopez Obrador, stunned by a vote count that shows him the loser in the July 2 elections, summoned his disappointed supporters to the Zocalo on July 8. He announced he is challenging the results through the Federal Electoral Tribunal and demanding a recount of all 41 million votes.
He also announced nationwide protests starting July 12 that will culminate in a march downtown and another massive protest in the Zocalo on July 16. "We knew we were confronting an economic and political power group that is accustomed to winning at any cost, that has no shred of moral scruples. They really don't care about the country and, much less, about the suffering of the majority of Mexicans," he told a crowd of some 200,000 chanting supporters who packed the plaza. " Their only goal is to maintain and increase their own privileges. It's this rapacious minority that has taken this country to ruin and turned it into an ocean of inequality."
MARKET IMPACT.
Such sentiments don't bode well for stability over the next eight weeks, as the electoral tribunal decides how to resolve the elections controversy. "I definitely expect choppiness and some volatility in the weeks ahead, and I think people should be prepared for that," says Gray Newman, Morgan Stanley's chief economist for Latin America, who lived in Mexico from 1986 to 1997.
Before the elections, opinion polls showed that Lopez Obrador had a good chance of winning. Investors had come to terms with the idea of a leftist President with populist tendencies. They figured that he would likely follow prudent macroeconomic policies to retain investment and to preserve financing for the ambitious social development programs he pledged to introduce to raise living standards for the 50% of all Mexicans who live on less than $4 a day.
Nonetheless, the apparent victory by Felipe Calderon, a pro-business conservative, prompted a mini-rally of sorts on the Mexican stock exchange. The index, which stood at 19,147 on the last trading day before the elections, has fluctuated by as much as 5% in one day, but rose to 19,700 by July 10, the day after Lopez Obrador presented his legal challenge.
"I would be cautious about letting the rally make one complacent, though, because this conflict could last a long time," says Newman. "The near-term political risks and the medium-term fiscal issues shouldn't be ignored." He met with top government officials and with representatives of both presidential candidates during a fact-finding trip to Mexico City last week.
POLICY DIFFERENCE?
The medium-term fiscal issues that concern Newman involve a drop in oil production at Mexico's main oil field, Cantarell, and a rise in current government spending that is masked by higher world oil prices. If the U.S. economy slows or oil prices decline in the medium term, whichever President takes office would have to cut spending. "That would be bad," says Newman. "Mexico needs enhanced public investment to provide better education and health care so that it can have healthier, better-trained workers to boost growth and make Mexico a globally competitive environment."
Foreign direct investors aren't saying publicly what they think of the elections controversy, but in private they say they believe that even if the election results were somehow reversed and Lopez Obrador became president, it wouldn't totally sour their view of Mexico as a desirable place to locate manufacturing facilities. As a member of NAFTA, Mexico has certain policy obligations to honor.
"The room for big changes in economic policy is quite limited, no matter who is declared the winner," says Damian Frasier, Mexico-based chief of Latin American equity research for UBS Securities. Besides, he adds, "the economy is in very strong shape, and investors assume that Lopez Obrador would have strong incentives to maintain the financial stability that Mexico has achieved." The economy is on pace to grow by 4% this year, after five years of sluggish growth averaging less than 1% annually. "If you are Ford (F) or (GM) and are planning big investments in Mexico, there's no particular reason to wait until September to announce that."
PROTEST PUSH.
Still, the coming two months could be a time of great uncertainty in Mexico. The country is still in the early stages of a transition to multiparty democratic rule that began six years ago when Vicente Fox put an end to seven decades of one-party authoritarian rule. Calderon, who started publicly discussing plans to put together a coalition government and who received congratulatory calls from President Bush and from the leaders of Spain, Canada, and Colombia last week, has toned down his celebratory rhetoric to wait for an electoral tribunal ruling.
Now that Lopez Obrador has presented his petition to the tribunal, he would do well to call off the protests and let the judges do their work. But he is unlikely to do that. He has a long history of staging public demonstrations to protest political setbacks. With just 240,000 votes, or .57% of the vote, separating him from Calderon, he apparently feels he has nothing to lose and much to gain by pushing ahead with the protests.
"Lopez Obrador is pursuing this course not because he's likely to change the end result, but because he owes it to his staunchest supporters to challenge the result," says Frasier. "His people are deeply distrustful of the electoral process, and he has every right to challenge it within legal terms."
Voters and investors can only hope for a positive outcome, regardless of who is declared the winner. |
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