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Banco J.P.Morgan, S.A., Institución de Banca Múltiple, J.P.Morgan Grupo Financiero Gabriel Lozano (52-55) 5540-9558 [email protected]

Economic Research Global Data Watch May 14, 2021

Economic Research Note

Mexico: Midterms likely to confirm Morena's consolidation  Lower Chamber and 15 gubernatorial elections are key in June 6 midterms  Morena will probably retain its majority but will struggle to reach two-thirds without allies  Economic momentum and vaccination progress should work in favor of the president’s party  Election is key to understand the president’s leeway on fiscal and institutional changes Midterm elections in Mexico will take place on June 6. The full Lower Chamber of Congress (500 members) is up for election as are 15 gubernatorial seats (out of 32); and local lawmakers. While there are 91 million registered voters in the country, only 65% vote on average in federal elections, and 52% in the midterms. This time, low participation should not surprise, given pandemic fears. In 2018, the commanding victory of Andrés M. Lopez Obrador (AMLO) and his populist Morena party was rooted in his promises to fight corruption and crime and to partially reverse the multi-party Pact of 2012 that paved the way for structural reforms (for a detailed political-economy discussion see: Mexico 101 and “The politics and economics of the pandemic in Mexico”). AMLO won with 53% of the vote, and Morena reached a simple majority in both chambers, and a nearconstitutional majority with the support of small parties that have aligned their preferences with Morena (Figure 1). Figure 1: Current Congress composition by coalition 70



Figure 2: Trust in institutions Grade, 10 is highest level of trust Political Parties Lawmakers* Police INE** SCJ** Businessmen Presidency Social Media Universities Army 0







Source: Consulta Mitfsky 2020. *Low-Chamber or Deputies House; **Electoral Institute; ***Supreme Court of Justice

While AMLO’s approval has been declining steadily since peaking in early 2019, it remains above 50% despite last year’s pandemic-induced recession (-8.2%). Worth noting, the 20%-pt decline in his approval already makes AMLO less popular than right-wing Calderon was at the same point of his term (2009) right in the middle of the GFC (Figure 3). Figure 3: Presidential approval leading up to midterm elections % 90 80

VFQ '00-'06 (PAN)

FCH '06-'12(PAN)

EPN '12-'18 (PRI)

AMLO '18-'24(MORENA)

70 60 50


% of total

date of the Supreme Court of Justice (SCJ) president, but with little progress on corruption and crime—even with the president expanding the army’s participation in construction and vaccination campaigns. Political parties and lawmakers are still poorly regarded by the population while the army and the president continues to top “trust in institutions” polls (Figure 2).


Constitutional majority (66%+1)

40 30 0






10 12 14 16 18 20 22 24 26 28

Source: Oraculus Poll of Polls. As of April 2021

50 40



Simple majority (50%+1) 27

Figure 4: Who is to blame for the economic downturn? %








0 Morena*

Main opposition bloc


Source: INE and J.P. Morgan. *Including allies. **MC and independent

The composition of Congress and a strong executive branch paved the way for three years of partial backtracking of some reforms via changes in bylaws, which only require a simple majority. In the energy sector, swift approval of AMLO’s preferred infrastructure projects, and plans to extend the man-



30 20


10 0 The pandemic


State's governor

Source: Reforma Newspaper, Apr 16, 2021


Banco J.P.Morgan, S.A., Institución de Banca Múltiple, J.P.Morgan Grupo Financiero Gabriel Lozano (52-55) 5540-9558 [email protected]

Economic Research Mexico May 14, 2021

It is remarkable that the president remains so popular after last year’s economic contraction. Perhaps the fact that people blame the pandemic, not AMLO, for the economic downturn (Figure 4) explains his approval, but it complicates the election outlook for Morena (Figure 5; Table 1).

for this year consistently revised up since the beginning of the year, we believe Morena/AMLO will consolidate its power, and will continue to move forward with a populist agenda.

Figure 5: Perception of government's management of the pandemic % 60






0 Success


Doesn't know

Source: El Financiero, June 2020

As noted before, people tend to dislike lawmakers and political parties—which probably explains the lower turnover in midterms—and with AMLO not on the ballot, the results will probably be tighter than expected. This is why AMLO tried hard to conduct the recall referendum on the day of the midterms, as his communication style has helped to maintain strong support from Morena’s hard-core voters. The proposal of a two-year extension of the mandate of the SCJ president is raising concerns AMLO will use the referendum for the same purpose. He will now have to wait until 1H22 to conduct the referendum. Morena is also concerned because the main opposition parties formed a coalition in local and federal elections (Figure 6). The collapse of an urban train bypass in Mexico City—a Morena stronghold—is expected to affect Morena at the municipal level at the very least. Figure 6: Vote intention for Lower Chamber % 50


40 30

"Va por México VxM" opposition coalition for '21




12 5



0 Morena






Source: Oraculus Poll of Polls. Effective preference (excludes no response). *Either officially declared or de facto allies to Morena. As of May 2021

It is difficult to tell if the pandemic will work against Morena in the elections, but we believe the decline in new cases and the gradual reopening of the economy (Figure 7), will allow Morena to hold on to its majority. With growth expectations 2

It seems like Morena will gain six States at least, retain power in one, and has front-runners in three more. Six gubernatorial races are too close to call. This could bring Morena close to controlling 50% of the 32 states, as it already has seven. Worth noting, Morena already has the majority in 18 out of 32 local congresses. A constitutional change requires the support of two-thirds majorities of both chambers and simple majority in 50%+1 of local congresses. Backtracking structural reforms (e.g., energy, telecom) requires constitutional majorities, although the constitutional implications of the recall referendum are less clear. Figure 7: Mobility versus new cases - end of month % avg weekly change (cases), end of month 60 Apr 20 (0.5%, +58%) Mar 20 40 (-37%, +282%) Sep 20 (-0.1%, -0.7%)

20 0

Mar 21 (4%, -12%)

Apr 21 (-1%, +3%)

-20 -5


5 10 % avg weekly change (mobility), end of month

Source: Our World in Data, Apple and J.P. Morgan. As of April 2021

Table 1: Mexico midterm elections - Gubernatorial races State Baja California BCS Campeche Chihuahua Colima Guerrero Michoacán Nayarit Nuevo Leon Queretaro SLP Sinaloa Sonora Tlaxcala Zacatecas

Party in power Morena PAN PRI PAN PRI PRI PRD PAN Independent PAN PRI PRI PRI PRI PRI

Front-runner (vote intention) Morena (43%) VxM* - PAN (51%) VxM - PRI (34%) VxM - PAN (40%) Morena (37%) Morena (34%) Morena (38%) Morena (40%) MC (29%) VxM - PAN (49%) Morena allies (36%) Morena (48%) Morena (46%) Morena (44%) Morena (46%)

Runner-up VxM - PAN (28%) Morena (30%) MC (31%) Morena (34%) VxM - PRI (28%) VxM - PRI (30%) VxM - PRD (37%) VxM - PAN (32%) VxM - PRI (27%) Morena (27%) VxM - PAN (34%) VxM - PRI (35%) VxM - PRI (37%) VxM - PRI (36%) VxM - PRI (34%)

Source: El Financiero. May, 2021. *Va por Mexico (VxM) is the opposition bloc. Underscored parties are States where there would be continuity; shaded cells show States too close to call

While it is possible that AMLO turns more pragmatic regardless of the result, delivering a fiscal reform as soon as September, the first half of AMLO’s mandate has brought a degree of institutional deterioration, with the government promoting less competition, the dilution of autonomous entities, and a more confrontational stance with USMCA partners.

Banco J.P.Morgan, S.A., Institución de Banca Múltiple, J.P.Morgan Grupo Financiero Gabriel Lozano (52-55) 5540-9558 [email protected]

Economic Research Global Data Watch May 14, 2021

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Banco J.P.Morgan, S.A., Institución de Banca Múltiple, J.P.Morgan Grupo Financiero Gabriel Lozano (52-55) 5540-9558 [email protected]

Economic Research Mexico May 14, 2021

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Banco J.P.Morgan, S.A., Institución de Banca Múltiple, J.P.Morgan Grupo Financiero Gabriel Lozano (52-55) 5540-9558 [email protected]

Economic Research Global Data Watch May 14, 2021

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14 May 2021 10:00 AM EDT

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