Mexico’s Leftists Won Big. Investors Are Worried.

A final count of votes released over the weekend suggests Mexico’s leftist governing party and its allies would capture large majorities in Congress, potentially enabling the coalition to pass sweeping changes to the Constitution.

The official tally from elections last week showed that the party, Morena, and its partners appeared on their way to clinching a two-thirds supermajority in the lower house of Congress.

In the Senate, it seemed that the coalition would fall short of a supermajority — but by a small number of seats, analysts said, meaning it would likely need to attract the support of only a few opposition legislators to alter the Constitution. Building those alliances “is relatively easy to achieve,” said the party’s president, Mario Delgado, in an interview.

“We are now a dominant force,” Mr. Delgado added, “by the decision of the people.”

The final makeup of the legislature is still unclear because a share of seats in the Mexican Congress are appointed via a system of proportional representation in August. Legal challenges could also affect how seats are allocated.

But Morena has come close enough to total dominance to prompt a strong reaction from a sector that the party can’t ignore: the financial markets.

In the volatile days following the election, investors’ alarm has been on full display, with Mexican stocks battered and the peso suffering its worst week since the pandemic.

The concern centered on the possibility that Morena would use its broad mandate to enact constitutional changes that detractors warn could gut existing checks on presidential authority, financial analysts said.

The proposals were first introduced by Andrés Manuel López Obrador and include plans to eliminate independent regulators and to appoint judges and election officials via popular vote, which critics warn could make them more susceptible to political pressure. Among other concerns, investors fear that upending the judiciary could make it less certain that they’ll get a fair hearing in disputes.

“The feeling of the market is that under the Morena party and with this plan on the table, a radical change could be coming,” said Janneth Quiroz Zamora, director of economic research at the brokerage Monex. “The biggest fear is about the possible elimination of checks on executive power.”

In what seemed to be an attempt to calm the market, the incoming president, Claudia Sheinbaum, a protégée of Mr. López Obrador, announced last Monday that the current finance minister, Rogelio Ramírez de la O, who is seen as a stabilizing force, would stay in the job.

“He is a great public servant who provides certainty of good financial and economic management,” she said.

Ms. Sheinbaum won the presidency with the largest share of votes in decades and Morena also claimed most of the governorships on offer.

Her initial comments encouraged investors that “the government was sensitive to their concerns,” said Blanca Heredia, a political analyst based in Mexico City. That was “mostly because of the speed of the reaction,” Ms. Heredia said, noting that the new president “needs and wants economic growth.”

But then on Thursday, the leader of Morena in the lower house of Congress, Ignacio Mier, appeared to announce that the party would seek to approve the constitutional changes in September, before Mr. López Obrador steps down and Ms. Sheinbaum takes over.

The peso fell again. Hours later, Mr. Mier walked back his statement in a radio appearance in which he suggested that any changes wouldn’t be rushed through.

Ms. Sheinbaum later told reporters the measures would be subject to broad dialogue. She also posted a photo of herself meeting with an executive from the investment firm BlackRock. “They are committed and enthusiastic about increasing investment projects in Mexico,” she said on social media.

Mr. Delgado, the party president, said that Mr. López Obrador and Ms. Sheinbaum would need to agree on how to move forward with the plans.

“These are reforms that will need to be discussed and their reach, their final version, will come about in the Congress, and the pace of their approval will be decided by the president,” he said, referring to Ms. Sheinbaum.

The upshot, analysts said, is that in a political system where one party has so much control, the market could emerge as a moderating force.

“I do think this adverse reaction from the market is going to cause a very thorough rethinking of what they are going to approve and how they are going to approve it in September,” said Joan Domene, a Mexico City-based senior economist for Latin America at Oxford Economics, an economic consultancy.

Mr. López Obrador, though, seemed undeterred. At his regular news conference on Friday morning, the president reiterated his commitment to the changes and seemed to minimize the peso’s declines, saying, “justice is above the markets.”

The mixed messages showed, analysts said, that investors’ influence will depend on whether the people leading Morena — including Mr. López Obrador — actually listen to them.

“Markets are a straitjacket for politics,” he said. “But not for everyone equally.”

Emiliano Rodríguez Mega and Miriam Castillo contributed reporting.

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