MORENA party’s candidate, Claudia Sheinbaum, won the Mexican presidential election with a historic margin, receiving 60% of votes. This victory was anticipated, but the scale of left-leaning MORENA's win in Congress was unexpected. The ruling party and its allies achieved a qualified majority in the Chamber of Deputies but not the Senate, falling just short of the two-thirds majority needed in both houses to allow them to enact constitutional changes without opposition support.

While policy continuity is still expected, this landslide victory by Morena could lead to increased policy and reform risks at a time when Mexico is currently a focal point for “nearshoring” —a trend that has positioned Mexico as a strategic manufacturing hub for companies diversifying their supply chains. The wider-than-expected margin could make it easier for MORENA to implement more aggressive spending plans and pursue outgoing President Andrés Manuel Lopez Obrador (AMLO)’s 20-point reform agenda presented in February 2024, which includes increasing access to education and healthcare, increasing minimum wages and potentially reversing the previous pension system reform. Some market participants are also concerned that a potential reform of the Judicial system could weaken the institution’s independence and judicial power. Sheinbaum has highlighted this will be one of her administration’s first priorities.

It is still unclear how closely Sheinbaum will follow in Lopez Obrador’s footsteps. While some political analysts view Sheinbaum as a technocrat, she is also part of a left-leaning party with strong ideologies and aims to centralize power. At the same time, she faces significant external pressure to keep the fiscal balance in check, boost trade and investment, and reduce violence.

Looking ahead, U.S. investors should monitor several key challenges ahead for the new administration in Mexico. The upcoming review of the USMCA in the second half of 2026 will be crucial for understanding the future of trade relations and regulatory frameworks affecting multinational companies in Mexico. Additionally, the ability of Sheinbaum’s administration to enhance infrastructure and strengthen the rule of law will be critical for attracting firms looking to relocate production to Mexico. Moreover, the rhetoric of U.S. candidates in the upcoming U.S. election, especially regarding potential tariffs and migration policies, could impact bilateral relations and economic policies, influencing the investment climate in Mexico.

The immediate market reaction to the election results was negative, with the Mexican peso depreciating over 4% the day following the quick vote release. Despite the MXN being one of the strongest performing major currencies again this year, supported by high real interest rates and robust inflows from remittances and tourism, the election outcome introduces new uncertainties that could lead to further volatility. In the short-term, jitters in Mexican equities and bonds could persist as investors continue to digest the potential for non-market friendly reforms, especially given that Mexican assets had become a consensus overweight. Longer term, “nearshoring” is a key tailwind for Mexico’s economy and markets, but exactly how much it captures of this potential remains to be seen. 

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