Lopez Obrador calls for “calm” in the face of market decline

MEXICO CITY (EFE and El Universal).— Mexican President Andrés Manuel López Obrador said the country was not “that affected” by Black Monday on the global market, despite the fall of the main international stock markets and fears of a recession in the United States.

“It doesn’t affect us that much because our finances are very strong. Of course, we are neighbors of the United States, there is economic integration and it affects everyone, it affects Japan, it affects everywhere, but we can resist a little longer,” said the president during his morning press conference.

The Mexican leader’s statements come after the news broke that Wall Street had plunged at the opening on Monday, with falls of more than 1,000 points in two of its main indicators, the Dow Jones Industrial Average and the Nasdaq, due to fears of a recession in the United States.

This seems to have spread to other international markets, such as Japan, where the main index of the Tokyo Stock Exchange, the Nikkei, fell by 12.40%, the second largest percentage drop in its history. However, the Japanese stock market ended up rebounding today with an opening of 10%, an intraday record in points.

According to analysts, volatility has reached levels not seen since the stock market crashes of March 2020, linked to the declaration of the Covid-19 pandemic.

López Obrador said that this will not impact Mexico that much, even though the exchange rate was quoted at around 20 pesos per dollar, its highest level since 2023.

He argued that the country has record international reserves in the Bank of Mexico, which reach 221 billion dollars and that the Mexican peso is stronger than under other governments.

“We have sufficient reserves, a record for the Bank of Mexico, we have never had so many reserves, never like now. And the other thing that helps us is that throughout the six-year term the peso has appreciated, the peso has strengthened,” he said.

“Huge fortresses”

Virtually elected president Claudia Sheinbaum highlighted the “enormous strengths” of the country’s economy in the face of Black Monday, and highlighted the record job creation in Mexico, compared to the unemployment rate in the United States.

“Obviously, what happens in other countries has a financial impact on Mexico,” he stressed at the end of a meeting with governors from the east of the country, but warned that “it would be very different if the Mexican economy were weak, if there were no jobs or if the domestic market had not been strengthened.”

Regarding the fear of a recession in the United States, Claudia called for not getting ahead of ourselves and “waiting for the impact of what has happened.”

“Although we are integrated in many ways into the U.S. economy, there are also enormous strengths in our economy, which allow us to have a much stronger domestic market today, despite changes in the parity against the dollar, thanks to public works, private investment, welfare programs and the wage increases that have occurred,” said the president-elect.

He therefore pointed out that it is “fundamental to maintain employment in the country” in the face of a possible global economic crisis, and that investment in the Government’s priority projects will be key.

He added that his government will continue to seek private investment within the scheme known in English as ‘nearshoring’ or relocation of investments, which “presents many opportunities for Mexico.”

These statements come after the Wall Street stock market collapsed at the opening on Monday, with falls of more than 1,000 points in two of its main indicators, the Dow Jones Industrial Average and the Nasdaq, due to fears of a recession in the United States, and the situation in Japan, where the main index of the Tokyo Stock Exchange, the Nikkei, plummeted 12.40% on Monday, the second largest percentage drop in its history.

According to analysts, volatility has reached levels not seen since the stock market crashes of March 2020, linked to the declaration of the Covid-19 pandemic, due to fear that the Federal Reserve (Fed) will dictate the expected rate cut too late.

I would lose what I gained

Analysts expect the exchange rate to exceed 20.40 pesos in the coming months, which would leave a negative balance in this six-year term, as well as the previous 12. The last time the currency appreciated during a government was with Manuel Ávila Camacho, from 1940 to 1946, according to Inegi records.

If nervousness worsens, the exchange rate will reach 21 in a few months, estimated the chief economist for Rankia Latin America, Humberto Calzada.

“We are in a situation where there is a lot of sensitivity in the market and any news could generate these abrupt movements,” he said.

Black Monday Weight

Experts believe that the peso will once again not end well, as in previous six-year terms.

We still have to wait

Humberto Calzada, head of Rankia Latin America, believes that it is not yet possible to estimate what will happen on a national scale. “We will see how this transition of the government evolves, since, if later on there is extraordinary news with the reforms, this market sensitivity could increase,” he commented.

Negative panorama

The deputy director of economic analysis at CI Banco, James Salazar, does not rule out that the parity will touch or even exceed the 20.40 registered at the start of the six-year term. What is relevant, he said, is to see if one of the elements that have pressured the peso will dissipate in order to predict whether the depreciation will end at the end of Andrés Manuel López Obrador’s six-year term.

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