The IMF on Thursday warned that uncertainty associated with the policies of the incoming administration of Mexican president-elect Andres Manuel Lopez Obrador persists and poses a significant challenge for the country’s economy.
The IMF issued the warning in a report after a team visited Mexico last month to conduct an annual economic review. Its concern comes a week after Fitch Ratings changed its outlook on Mexico’s long-term foreign currency debt from “stable” to “negative,” citing the potential policies of Lopez Obrador.
Mexico’s main domestic risks “pertain to uncertainty” about the priorities of the administration, the continued existence of energy and other reforms, and questions over whether oil production would decline further, the IMF report said.
It also mentioned a deterioration of the rule of law.
The future hinges on the “steadfast implementation of structural reforms, while ensuring continued macroeconomic stability,” the report said.
The leftist Lopez Obrador has tried to smooth anxieties in the business community, but he upset many last month by canceling a partly built, US$13 billion airport on the outskirts of Mexico City.
Lopez Obrador has also said he would review private concessionary oil exploration contracts granted under Mexican President Enrique Pena Nieto’s energy reform.
He said he would not cancel them if they were fairly granted, but some fear future contracts could be delayed or canceled.
Mexico’s main stock index on Thursday plunged nearly 6 percent after Lopez Obrador’s party introduced legislation to dramatically slash the fees banks can charge clients.
Dragged down by banking stocks, the BMV index slid 6.18 percent after Mexican Senate majority leader Ricardo Monreal introduced the bill, before recovering slightly to close down 5.81 percent.
The peso also weakened 1.2 percent against the US dollar.
Monreal said the bill would eliminate or curb “excessive” amounts that banks in Mexico charge for things including ATM withdrawals, late payments on credit cards, annual fees, inter-bank transfers and business’ use of credit card terminals.
Given that Lopez Obrador’s coalition holds a majority in both Mexican houses of Congress, the bill is likely to pass — and have a “considerable impact” on banks’ revenues, BASE bank chief economist Gabriela Siller said.
“Although the bill was not proposed by the president-elect, Monreal is the leader of his Morena party in the Senate, which reinforces expectations that the next government could maintain an unfavorable relationship with the private sector,” she said.
The IMF said Lopez Obrador’s administration would inherit an economy with “very strong fundamentals.”
The fund expects growth of 2.1 percent this year and 2.3 percent next year and a decline of public debt to about 53 percent of GDP from 54.3 percent last year.
Lopez Obrador is to take office on Dec. 1.
Additional reporting by AFP
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