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News | Question of the Week, WC 26th November
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Question of the Week, WC 26th November

Q: AMLO's swearing-in comes amid increasing market volatility; will he deliver a conciliatory speech?

A: AMLO's inauguration speech tomorrow will give an indication of how his presidency might look.  He likely will make a defiant "Mexico first" inauguration pledge, but we expect him to deliver a conciliatory speech.  He probably will say that there will be no nationalisations and that he will respect private business.  He likely will reaffirm his intention to be fiscal responsible, in line with his victory speech.  AMLO's inauguration speech tomorrow will give an indication of how his presidency might look.  He likely will make a defiant "Mexico first" inauguration pledge, but we expect him to deliver a conciliatory speech.  He probably will say that there will be no nationalisations and that he will respect private business.  He likely will reaffirm his intention to be fiscal responsible, in line with his victory speech.

We are still giving AMLO the benefit of the doubt, but we have to admit that risks have tilted dramatically to the downside, with most signals gradually pointing to a rocky road ahead.  The next big event, however, will be the first budget, due on December 15, which really will define AMLO's economic and financial template.  If AMLO's budget points towards greater public spending, and/or makes unrealistic macro assumptions, investors' confidence will be trashed and we will have to change—drastically—our view on the incoming government.  But if AMLO sticks to his word and pledges a business-friendly and fiscally responsible administration—as recent messages have hinted—markets will cheer the move.  Financial and economic conditions likely will improve next year, assuming a smooth AMLO-Trump relationship.  Mexico's economic potential would improve for 2020, as growth for most of 2019 would still be constrained by the lagged effect of the recent MXN sell-off and high interest rates.

Andres Abadia, Senior LatAm Economist

Pantheon Macroeconomics

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Posted: 30th Nov 2018

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