Final voting results announced over the weekend show Mexico’s left-wing ruling party and its allies will have a majority in Congress, potentially allowing the coalition to pass sweeping changes to the constitution.
Official figures from last week’s election showed Morena and its partners on track to secure a two-thirds majority in the lower house of parliament.
While the coalition is unlikely to win an absolute majority in the Senate, analysts said the small number of seats means any change to the constitution would likely require the support of only a small number of opposition lawmakers. Building such an alliance is “relatively easy to achieve,” party leader Mario Delgado said in an interview.
“We are now the dominant force, guided by the decisions of the people,” Mr. Delgado added.
Seats in Mexico’s Congress will be appointed through a proportional representation system in August, so the final composition of the legislature remains unclear. Legal issues may also affect how seats are allocated.
But Morena is close enough to full dominance to trigger a strong reaction from a sector the party cannot afford to ignore: the financial markets.
Investor alarm was on full display in the anxious days following the election, with Mexican stocks plunging and the peso suffering its worst week since the pandemic.
The focus is on the possibility that Morena will use his expansive powers to enact constitutional changes that detractors warn about, financial analysts said.
The proposal was first introduced by Andrés Manuel López Obrador and includes a plan to eliminate independent regulators and appoint judges and election officials through popular votes. Critics warn this could make them more vulnerable to political pressure. Above all, investors worry that overturning the judiciary could undermine confidence that disputes will be given a fair hearing.
“There is a feeling in the market that radical change could come under Morenadang if this plan is put on the table,” said Janeth Quiroz Zamora, head of economic research at brokerage Monex. “My biggest fear is about the possibility that checks on executive power will disappear.”
In what appeared to be an attempt to calm markets, incoming President Claudia Sheinbaum, a protégé of Mr. López Obrador, said on Monday that the current Finance Minister, Rogelio Ramírez de la O, would calm markets. Shiki announced that it was considered a force. He’ll stay at that job.
“He is a great public servant who provides certainty for good fiscal and economic management,” she said.
Ms. Sheinbaum was elected president with the largest margin of votes in decades, and Ms. Morena won most of the proposed governorships.
Her opening remarks encouraged investors that “the government is sensitive to their concerns,” said Blanca Heredia, a political analyst in Mexico City. “It’s mainly because of the speed of response,” Ms. Heredia said, noting that the new president “needs and wants economic growth.”
But on Thursday, Ignacio Mier, Morena’s leader in the lower chamber of parliament, said the party would seek to approve constitutional changes in September, before López Obrador steps down and Sheinbaum takes office. It appears that it has been announced that
The peso fell again. Hours later, Ms. Maier went on her radio to retract her statement, suggesting she was in no rush to make any changes.
Mr. Sheinbaum later told reporters that the measure would be the subject of widespread conversation. She also posted a photo of herself meeting with an executive from investment firm BlackRock. “They are committed and passionate about increasing investment projects in Mexico,” she said on social media.
Mr. Delgado, the party leader, said Mr. López Obrador and Mr. Sheinbaum must agree on how to move forward with the plan.
“These reforms must be discussed, their reach, the final version, will come from Congress, and the pace of approval will be determined by the president,” he said, referring to Ms. Sheinbaum.
Analysts said the market could eventually emerge as a mediating force in political systems where one party has too much control.
“I think this negative reaction from the market will cause a thorough reconsideration of what to approve in September and how to approve it,” said Joan Domene, Mexico City-based Latino chief economist. American economic consulting firm Oxford Economics.
But Mr. López Obrador seemed undeterred. At his regular press conference on Friday morning, the president reaffirmed his commitment to change and appeared to minimize the decline in the value of the peso, saying, “Justice is more important than the market.”
The mixed message suggests investors’ influence will depend on whether those leading Morena, including Mr. López Obrador, actually listen to them, analysts said.
“Markets are the straitjacket of politics.” Mr. Domene said. “But it doesn’t apply equally to everyone.”
Emiliano Rodriguez Mega and Miriam Castillo contributed reporting.
