Political Assassination Rocks Mexico

The assassination of Rodolfo Torre Cantu, a popular PRI candidate for governor of Tamaulipas State, highlights rising political risk in Mexico. “Markets are likely to remain jittery on concerns that further violence could ensue,” says RBC, noting a slight weakening in MXP, which underperformed other EM currencies Monday. The incident represents “the clearest attack on the political process since crime became a focal point for markets in early 2009,” says Barclays. The bank says violence could intensify as the federal government is forced to strike back, and says headlines are unlikely to get any better. However, Barclays continues to believe that there is not a threat to the political regime. “Although we do not expect any resultant escalation of violence to produce a lasting repricing of Mexico’s risky assets, we think headline risk could keep them under pressure and, in particular, limit the peso’s upside potential,” says Barclays. Mexicans go to the polls Sunday to elect governors in 12 states.