Claudia Sheinbaum was set to become the first woman to run Mexico after early results in the presidential elections on Sunday showed that she had more than 57% of the votes when LatinFinance went to press.
The left-wing candidate beat center-right candidate Xóchitl Gálvez, who had just over 30% of the votes with 21% counted as of 11:10 p.m. Mexico City time (1:10 a.m. EST), according to the National Electorate Institute.
Sheinbaum, a former mayor of Mexico City, will face large challenges when she takes office on October 1, many of which her predecessor, Andrés Manuel López Obrador (AMLO), could not resolve. These include reducing a high crime rate, improving relations with the business sector and contending with the huge debt of Pemex, the national oil company.
“Sheinbaum’s team has signaled that they will continue to help Pemex refinance its debt maturities,” Carlos de Sousa, emerging markets debt portfolio manager at Swiss investment management group Vontobel, told LatinFinance ahead of the vote. This “has been well received by the markets.”
Sheinbaum mentioned during her campaign that she wants Pemex to invest in renewable energy.
This “would be a welcome upside scenario for investors if the next administration improves the company’s poor environmental track record,” de Sousa said.
He added that stepping up investment in renewable energy “would be a cost-efficient way of reducing the company’s borrowing costs, given that the well-known environmental controversies of the oil company prevent investors from getting involved.”
With more than $100 billion in debt, Pemex faces maturities of $6.8 billion in 2025 and $10.5 billion in 2026, according to company data.
SEEKING PRIVATE INVESTMENT
Sheinbaum also plans to seek private investment in energy and infrastructure projects, Altagracia Gómez, Sheinbaum’s economic advisor, told LatinFinance in May.
According to de Sousa, the markets liked the fiscal discipline of AMLO’s administration during his first five years in office, when he maintained an average fiscal deficit of 3.8% of GDP despite the pandemic.
But AMLO will leave office with a 5.9% of GDP deficit this year, according to an estimate by the International Monetary Fund.
That would be the largest fiscal deficit on record for Mexico — and a big challenge for Sheinbaum.
“The expectation is that the next government will quickly reverse this and return to their usually responsible fiscal policies in 2025,” de Sousa said. “Sheinbaum’s choice of economic advisors also suggests that this will be the case, but it is a risk that markets should watch for in 2025.”