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Mexican peso rallies after new president is sworn in

The Mexican currency is on an upswing after the election of a new president.

Mexican peso
Source: Bloomberg

The Mexican peso is rallying after the new president, Andrės Manuel López Obrador, took office. The comeback of the currency comes after an agreement to buy back bonds after a cancelled airport project. The peso gained 1.5% after months of decline.

How Mexico’s new president wants to change economy

Obrador, or AMLO as he is known in Mexico, was elected to office in July in a landslide. The former mayor has promised to end corruption and attract new investments in infrastructure to the nation. However, he scrapped plans for a $13 billion airport in Mexico City, charging that there was corruption. Critics said that he was being an authoritarian and investors left the country in droves. As a result, the peso fell to a four-year low.

Obrador also made investors nervous with his leftist political views that he says will help economically disadvantaged Mexicans. After the airport deal fell through, the current president blamed outside factors and asserted his independence from the MX35.

‘I'd also like to note that we're [the Mexican government] not just going to govern for the markets,’ said Obrador.

International banks noted that Obrador’s tone in the past and in his inauguration speech worried investors.

‘All in all, the tone of his speeches was less conciliatory, from a market standpoint, than the one from the speech he delivered on the night of the elections on 1 July,’ said Credit Suisse bankers when analysing Obrador.

Despite the concern when Obrador was elected in the summer, after the Mexican finance ministry decided to buy the airport bonds in the fall, the peso rallied and calmed investors’ fears.

The immigration crisis with the US and Central America

Aside from the airport controversy, there is the immigration issue with the US. Though there are far fewer Mexicans going to live there than in past years, there are still a great number of undocumented immigrants going to their neighbor to the north. US President, Donald Trump, has threatened to build a wall between the nations and use punitive measures to discourage settlement in the US.

Obrador has promised to get to the root of the problem of Mexicans leaving the country by creating more jobs. He also vowed to be respectful to Trump during future negotiations about immigration.

In addition to Mexican immigration to the US, there is the influx of refugees from the Central American nation Honduras settling in Mexico while trying to seek asylum in the US. Obrador has said the government will provide 100,000 visas to Honduran residents in the country.

Obrador has many issues to address during his six-year term. Investors will be closely watching to see how he will shape Mexico's future.

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