Mexico: Historic.

There is a lot going on in U.S. politics and the world right now, but today, I want to focus on Mexico’s historic election.

On Sunday, June 2 Mexicans headed to the polls to elect their next president. In the end, and as expected, Claudia Sheinbaum came out on top – garnering approximately 58 percent of the vote compared to Xochitl Galvez’s 28 percent – to become the first woman elected as president in Mexico’s history.

The granddaughter of Jewish refugees who fled Europe during the Holocaust, president elect Claudia Sheinbaum Pardo was born in Mexico City to scientist and activist parents who were involved in the 1968 student protests and sparked her interest in education and activism.

Sheinbaum followed in her parents’ science-focused footsteps, obtaining a bachelor’s degree from Mexico’s National Autonomous University (UNAM) and a master’s degree from UC Berkeley, before returning to UNAM to complete her doctoral studies in environmental engineering. In 2007, she was one of a group of United Nations climate scientists who received the Nobel Peace Prize.

Dr. Sheinbaum’s new title of president-elect comes in the wake of a decades-long public service career. Since 2000, Sheinbaum has been formally involved in politics, including serving as the secretary of the environment in the Mexico City municipal government, the mayor of Tlalpan (a suburb of Mexico City), and most recently as the mayor of Mexico City – amongst the largest and most challenging metropolitan areas in the world.

Throughout her career, she has been a staunch ally of current president Andres Manuel Lopez Obrador, and her latest political triumph suggests a certain degree of political continuity, a point further suggested by Sheinbaum’s announcement that Rogelio Ramirez de la O will stay on as finance minister. However, as Sheinbaum prepares to officially take office on October 1, 2024, we should be skeptical of pundits’ conclusions that she will simply follow in the shadow of her predecessor.

On Sunday, Mexicans also voted for more than 20,000 other officials throughout the country. In addition to securing the presidency, Morena also picked up 7 more governorships – bringing Morena’s total to 29 out of 31 – alongside likely, but still not confirmed, supermajorities in both houses of congress.

The anticipated Morena supermajorities should give Sheinbaum wide leverage to advance her legislative priorities but may also open a window for president Lopez Obrador in the final months of his administration. This is because, while Sheinbaum takes office in October, the new Mexican congress will be sworn in on September 1, 2024. President Lopez Obrador may use that opportunity to push through a series of controversial constitutional amendments that had thus far been blocked by congress. For more on the proposed amendments, you might be interested in a client alert we published at White & Case in Mexico City. This fear of potential constitutional change appeared to be reflected in the market this week, with the peso falling roughly 10 percent in dollar terms since Sunday’s elections.

Regardless of their political alignment and the clear mandate following Sunday’s elections, the persistent challenges facing Mexico, alongside president Lopez Obrador’s possible forthcoming September machinations, are likely to necessitate at least some distancing in approaches between president-elect Sheinbaum and her predecessor in the years to come. Chief among the challenges she will face are Mexico’s significant water shortages, growing fiscal deficits, and persistent insecurity and violence. The most urgent of which is the increasingly dire drought and extreme heat conditions in Mexico with unprecedented temperatures recorded in recent weeks and nearly a third of the country in severe drought.

In Mexico City, the situation is even more precarious with the metropolis set to run out of drinking water as early as the end of this month. In the days ahead, president Lopez Obrador will have to manage the country’s high electricity and water demands, though Mexico’s outdated infrastructure means that this challenge will confront the president-elect as well.

Mexico’s fiscal deficit is also expected to reach 2.5 percent of GDP by 2025, with real GDP growth now estimated to slow to 2.0 percent in 2024, down from 3.2 percent in 2023. This decrease is explained by a combination of stubborn inflation, high labor costs, and the strength of Mexico’s peso. Citing a need for inflationary shocks to dissipate, in May Banxico opted to pause future interest rate cuts.

This election cycle was also the most violent since 2018, with at least 316 incidents targeting politicians, including the murder of at least 37 candidates. And while president Lopez Obrador has cited a decrease in homicides during his administration, homicides still continue to hover at around 30,000 per year. Finally, extortion rackets are on the rise with a recent report finding that at least 20,000 storefronts selling tortillas were victims of criminal groups’ extortion fees alone, which had driven up tortilla prices by more than 60 percent.

There are also more bilateral and international hurdles for the incoming Morena president. At the forefront is the USMCA’s upcoming 2026 mandatory review. On May 22, trade representatives from all three North American nations gathered to discuss ongoing trade disputes; the principals agreed to another meeting before the end of year. Along the border, public and private stakeholders wrote a letter to presidents Biden and Lopez Obrador in May drawing attention to the severe economic impact of ports of entry closures and new inspection protocols slowing cross-border trade.

Despite a strong nearshoring narrative, Mexico continues to struggle due to the country’s failure to modernize the energy sector. A recent Wilson Center report highlights how less than 14 percent of Mexico’s FDI in 2023 represented new investments. Concerns also continue to mount regarding Mexico’s expropriation actions, with the construction company Vulcan serving as the latest entity to denounce the Mexican government’s closure of their operations in the state of Quintana Roo.

One area that has seen less tension in the bilateral relationship, as of late, is immigration. Border crossings are currently at their lowest levels since the start of the Biden administration, down almost half from 250,000 in December 2023 to less than 130,000 in April 2024. The recent downtick in migration encounters at the U.S. southern border may be a political reprieve for president Biden. However, this decrease comes as a second so-called border bill failed in congress last week. In response, president Biden issued an executive order on Tuesday to limit asylum access and expel migrants who attempt to enter between ports of entry at the U.S. southern border.

As always, me and my colleagues here at White & Case in Mexico City will continue to watch the developments following Mexico’s elections closely. I hope you’ll reach out via Facebook, Twitter, or LinkedIn.


Antonio Garza