PRI Win Sends Mexico Markets South

The Mexican Bolsa is down 1.3% at 23,742 and the MXP weakened to MXP13.25 the day after opposition PRI emerged victorious at mid-term congressional elections, with about 40% of the national vote. Fitch believes the outcome of the Mexican mid-term elections could lead to reform inertia. Credit Suisse seems to agree, saying that president Calderon and his ruling PAN party will likely face a challenging battle in the lower house when trying to push through major reforms in the remaining term of this administration, as they will likely require an even larger degree of cooperation from the triumphant PRI than the shop had envisioned. Nevertheless, Fitch points out that with the PRI eyeing the 2012 election, limited cooperation on reforms cannot be ruled out, especially those that strengthen the fiscal base. However, the agency cautions that the PRI may not be ready to assume the partial political cost of reforming the tax system at a time of a deep domestic recession.