Mexican Finance Secretary Takes Steps to Calm Investors, Market Reaction Mixed

The domestic currency closed at 17.87 units, a decline of 1.09%. The day before, it had dropped by 4%, a level not seen since October.

Ignacio Teson•Wednesday, June 5, 2024•2 min read

The peso continued to depreciate against the dollar, while the stock market managed to recover some of the previous day’s losses.

A single phrase may have caused a second volatile day for Mexican markets: “For an indefinite period.”

With these words, Mexico’s current Finance Secretary, Rogelio Ramírez de la O, confirmed he will remain at the helm of the economic portfolio during the tenure of recently elected President Claudia Sheinbaum.

In his first speech following the decision, he aimed to reassure investors that economic policy would focus on macroeconomic stability and fiscal prudence. However, financial indicators reflected concerns.

Specifically, the Mexican peso extended its sharp losses from the previous session, briefly challenging the 18 units per dollar mark, due to fears that a qualified majority of the ruling party in Congress could bring about deep constitutional reforms.

The domestic currency closed at 17.87 units, a decline of 1.09%. The day before, it had dropped by 4%, a level not seen since October.

“Fear continues,” said Gabriela Siller, director of analysis at Banco Base, to Reuters.

Meanwhile, the five-year CDS spread in dollars rose by 2.47% to 104.998 points.

On the other hand, Mexico’s main stock index S&P/BMV IPC, comprising the 35 most liquid companies in the local market, partially recovered from Monday’s 6% decline. The index rose by 3.24% to 53,485.62 units.

“The winning presidential candidate, according to the official quick count, asked me to remain at the Ministry of Finance and Public Credit, which I will do for an indefinite period,” Rodriguez de la O began his message on Tuesday.

He then mentioned that during this period, he will aim, among other things, to reduce debt by 2025 to levels compatible with a sustainable debt/GDP ratio in the medium term, around 3% of GDP. This will be complemented by collaboration with Mexico’s state-owned oil company Pemex to optimize “the proper use of public resources.”

He also sent a clear message to the financial world: “To confirm to international organizations and private investors that our project is based on financial discipline, adherence to the autonomy of the Bank of Mexico, respect for the rule of law, and the promotion of national and foreign private investment.”

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ABOUT THE AUTHOR See More

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.