The Mexican peso fell on Thursday after the ruling left-wing Morena party said it will approve 18 reform bills in September, including constitutional changes, a move that an analyst said will hurt investors and the financial sector.

The peso fell 2% to MXN17.88 per dollar on Thursday from MXN17.53 per dollar on Wednesday, extending the decline to 5.1% since MXN17.02 last Friday.

The drop started after Claudia Sheinbaum of the Morena party won Sunday’s presidential election by a landslide. This sparked concerns that she will have a supermajority in Congress to pass reforms and constitutional amendments without any checks and balances from opposition parties.

Ignacio Mier, Morena’s party coordinator in the Chamber of Deputies, said in a press conference that the proposed bills are designed to reform the electoral system, judicial power and the military.

A few independent bodies, such as the National Institute of Transparency and Access to Information, will be closed, he added.

The proposed reforms have sparked concerns for the potential impact on investors.

“They would be very damaging to the financial sector or investors in general,” Luis Rubio, chairman of the independent think tank México Evalua, told LatinFinance.

If approved, the reforms “would end the incoming government” and “kill investment in one fell swoop,” he added in an interview.

Looking ahead, Rubio said he expects that outgoing President Andrés Manuel López Obrador and Sheinbaum will negotiate the rules of the game and limits before the handover of power on October 1.

A DOWNGRADE?

On Wednesday, Moody’s said it will wait for further information on Sheinbaum’s plans before it assesses whether it change the country’s credit profile. Any changes would come in the fourth quarter of this year, Renzo Merino, a senior sovereign risk analyst at the credit ratings agency, said in a press conference.

The focus of the review will be on how the next administration plans to reduce the fiscal deficit, which is close to 6% of GDP, and manage the finances of the heavily indebted state-owned oil company Pemex, he added.

In July 2022, Moody’s downgraded Mexico’s long-term sovereign debt rating in foreign and local currency to Baa2 from Baa1, and revised its outlook from negative to stable. 

[PHOTO: Mexican President Andrés Manual López Obrador. Source: The president’s X feed]