The Mexico country-specific ETF has been gaining momentum in recent weeks, but quickly tumbled Monday after leftist presidential candidate Andres Manuel Lopez Obrador beat his competition while his allies picked up the majority of congressional seats.
The iShares MSCI Mexico Capped ETF (NYSEArca: EWW), the largest exchange traded fund dedicated to Mexican equities, increased 6.9% over the past month but plunged 2.4% Monday.
Andres Manuel Lopez Obrador, or better known by his initials AMLO, garnered over 50% of the vote in an election held Sunday, compared to his closest rivals’ 23% and 15% of the total, respectively, CNBC reports.
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A New Era for Mexico?
However, observers are wary that the far left President could push for tougher negotiations between Mexico, the U.S. and Canada under a new NAFTA deal in a time when trade relations are worsening.
“In many ways, it’s going back to the era before NAFTA in Mexico,” Carlos Gutierrez, former U.S. Commerce secretary, told CNBC. “I don’t think he’s going to make the negotiations any easier because a lot of what he would like to do will bump up against NAFTA.”
“This is not a good event here,” Gutierrez added. “He’s not going to back away from his instincts, and his instincts are left-wing, populist, anti-multinational (companies), nationalist.”
The U.S. and Mexico’s trade relationship has grown more strained in recent weeks after Mexico placed tariffs on several U.S. agricultural products, like pork, cheese and apples, in retaliation for U.S. levies on Mexican made steel and aluminum products.
While AMLO quickly gained popularity on his pledge that “the country will be cleansed” of corruption, market watchers dumped Mexican equities on fears that the new president’s policies could cripple the economy. AMLO said on the campaign trail hat he would roll back privatization in the country’s oil industry and double pensions for the elderly.
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