March 21, 2019
By Dave Graham and Stefanie Eschenbacher
ACAPULCO, Mexico (Reuters) – For two years, financiers at Mexico’s biggest annual banking bash issued veiled warnings about the risk of veteran leftist Andres Manuel Lopez Obrador taking power.
Now he is president, they and industry bosses have changed tack, pledging support for the popular new leader and his plans to revive the economy from the bottom up.
Bank bosses have used the run-up to the banking convention in Acapulco starting on Thursday to signal approval for Lopez Obrador’s plans to tackle chronic inequality through welfare handouts, ramp up financial inclusion and lift economic growth.
“What we expect in this banking convention is to be able to reinforce what we must and will be: remaining the best ally of the country and all governments in making Mexico grow,” Marcos Martinez, head of the Mexican banking association (ABM), told a news conference at the start of the gathering.
Martinez and other bankers hope the president will meet pledges to tackle corruption and gang violence in Latin America’s No. 2 economy, buttressing growth with the rule of law.
Still, skepticism about his economic credentials is widespread in business circles. So far executives reason they have more to gain by working with him than picking a fight with a president whose approval ratings run close to 80 percent.
Lopez Obrador, who took office in December, wiped billions of the value of Mexican financial assets when he canceled a new Mexico City airport on Oct. 29. Proposals floated by his MORENA party in Congress to curb bank fees also spooked markets.
Yet even as he rolls out welfare schemes across Mexico, he has promised to run a tight budget to protect the country’s investment-grade credit rating, and says he can achieve average annual growth of 4 percent during his six-year term.
Mexico’s banks are likely to tell the president they will work with him to achieve his goals, said a senior financial industry source, speaking on condition of anonymity.
That could unlock funds for Lopez Obrador’s plan to create jobs via infrastructure spending, and complement the goal of employers’ federation COPARMEX to lift the spending power of the lowest paid by tripling the minimum wage by 2024.
“We have a lot of faith in Mexico,” Emilio Romano, chief executive for Bank of America in Mexico, told reporters. “We’re very committed to continuing to finance the big Mexican and foreign multinationals in Mexico, and the big projects.”
Cooperating with Lopez Obrador to encourage an expansion of the Mexican middle class could help drive growth and curb the president’s worst instincts, a senior industrialist said, speaking on condition of anonymity.
Stating Mexico had “more financial resources than there are projects”, Mexico’s powerful CCE business lobby said last month it would work to end extreme poverty under the government of Lopez Obrador, who is due to speak in Acapulco on Friday.
By the end of his term, the ABM aims to get 30 million more people to use banking services – nearly three-quarters of those estimated to be without an account – and to support domestic demand by boosting lending to small businesses, homebuyers and families.
However, for the president to make the most of the goodwill in boardrooms, he must work harder to undo the damage caused by poor decisions such as the scrapping of the airport, said Gustavo de Hoyos, head of employers’ lobby COPARMEX.
Business wanted to invest, but right now, the government scored only about “50 percent” on investor confidence, he added.
“If the president and his team can take advantage of these strengths,” de Hoyos told Reuters, “I think we could see really big progress in the course of this administration.”
(Reporting by Dave Graham and Stefanie Eschenbacher; Editing by Lisa Shumaker and Grant McCool)