Since her historic election in early June, Mexico’s President-elect Claudia Sheinbaum of the Morena Party has seemed a bit preoccupied with calming spooked investors in an effort to mitigate a recent spike in volatility in Mexico’s stock and currency markets. After all, in the wake of her election, Mexico’s stock market declined to 5.7% on June 3rd while the Mexican peso, one of the world’s best performing emerging market currencies, experienced its largest weekly depreciation in four years losing approximately 10% of its value against the dollar.
To put the peso’s decline in starker terms, since the June 2nd election, the collective fortunes of 5 Mexican billionaires including Carlos Slim and German Larrea, among others, have lost approximately $16 billion in value.
Much of the market turbulence stems from a set of constitutional reforms originally proposed by outgoing President Andrés Manuel López Obrador. Critics have argued that if passed these reforms would “eliminate crucial oversight bodies, erode judicial independence, and concentrate excessive power in the executive branch.” According to Roberta Jacobson, a former U.S. ambassador to Mexico, investors seem particularly concerned about a proposed overhaul of the judicial system under which all federal judges, including members of the Supreme Court, would be subject to a popular vote.
At the time he initially proposed the reforms in February, López Obrador’s political party, Morena, lacked the needed congressional support to pass these initiatives. This situation changed dramatically on June 2nd when the party and its political allies including the Green and Labor Party managed to secure a super-majority in the lower Chamber of Deputies and came just two seats short of securing a super-majority in the Senate. The resounding electoral victory had finally put the party in a position to actually pass these reforms perhaps as early as September when Mexico’s new congress will be installed, and Mexico’s stock and currency markets were apparently attentive to this development.
During a recent press conference, Sheinbaum, who has indicated that she supports López Obrador’s reforms, attempted to reassure nervous investors by lauding what she described as a strong national economy and Mexico’s commitment to the rule of law. She also noted, in an apparent reference to the recent decline of the peso, that “these are special moments” that “will get adjusted.” Her announcement that she had chosen former Foreign Minister Marcelo Ebrard to head Mexico’s Ministry of the Economy which sparked a peso rally on Thursday certainly seemed to help. In a similar vein, Bank of Mexico Governor Victoria Rodriguez has sought to restore investor confidence by emphasizing that the incoming presidential administration would be financially disciplined and work to reduce public debt. Towards this end, Mexico’s finance ministry launched debt management operations in New York last week designed to reduce all the country’s total external debt payments for 2025.
Despite all the financial doom and gloom being expressed in Mexican markets, there’s at least one very good reason to be optimistic about Sheinbaum’s election. It is likely to signal the beginning of the end for López Obrador’s failed security strategy.
Throughout his term in office, Sheinbaum’s predecessor, López Obrador, defiantly chose to avoid directly confronting Mexico’s drug cartels stating a preference for targeting the “causes” of cartel violence in a strategy called “Hugs Not Bullets.” The truth of the matter is López Obrador never really seemed to take cartel violence all that seriously, and there were even times when he appeared almost deferential to Mexico’s drug cartels. He met with the mother of notorious drug trafficker Joaquin “El Chapo” Guzman in Sinaloa, and, during one of his daily press conferences, he curiously referred to cartel operatives as ‘respectful people’ who ‘respect the citizenry.’
Unfortunately, his strategy has proven to be an unmitigated failure that has emboldened Mexico’s cartels and led to an alarming escalation of violence in Mexico. As explained in a recent Los Angeles Times article, during the López Obrador Administration, the drug war in Mexico “has come to resemble actual warfare” with cartels using a range of weapons including grenade launchers, drones, tank-like vehicles, foreign mercenaries, and most recently improvised explosive devices. Although government statistics regarding the number of drug war-related homicides in Mexico are notoriously unreliable, it does seem reasonably safe to say that in 2023, for the sixth straight year, Mexico registered more than 30,000 homicides marking the most violent period in the country’s recent history. And, with at least 37 political candidates killed in the June 2nd election, López Obrador can also claim the dubious distinction of presiding over the bloodiest political cycle in Mexico’s modern history as well.
One of the most counterproductive features of the López Obrador strategy has been the policy of scaling back cooperation with U.S. law enforcement agencies including the U.S. Drug Enforcement Administration (DEA) even as both countries drowned in an epidemic of fentanyl use. In late 2020, for example, López Obrador’s ruling party passed legislation limiting the role of foreign law-enforcement agents in Mexico. Under this legislation, Mexico’s local, state, and federal officials were required to report “every telephone call, meeting or communication with a foreign agent within three days of its occurrence” to the federal government. Foreign law-enforcement agents operating in Mexico were similarly required to divulge any information they managed to acquire during the course of any investigation and to also provide monthly reports detailing their activities. Needless to say, only the most intrepid or perhaps foolish of foreign law-enforcement agents would ever be willing to take the risk that this type of reporting entails.
And then, in another blow to the DEA, on April 19, 2021, Reuters reported that Mexico had disbanded an elite anti-narcotics unit that had operated in Mexico for a quarter of a century in close coordination with the DEA. This unit had been trained by the DEA but was under the control of the Mexican government and had functioned as the main conduit for the DEA to share leads on drug shipments and other intelligence obtained in the United States with Mexico’s government.
For the record, DEA agents posted to Mexico have provided critical intelligence for several high-profile drug seizures and arrests of leading cartel figures in Mexico including, among others, Joaquin “El Chapo” Guzman. According to Matthew Donahue, who retired from the DEA in 2022 after three decades of service with the agency, under López Obrador, cooperation with the DEA was virtually ‘nonexistent’ and ‘the worst it had ever been in Mexico.’
Although López Obrador has never hesitated to invoke a sense of nationalism to justify this feature of his strategy insisting that Mexico will not ‘act as policemen for any foreign government,’ it’s more likely that he scaled back cooperation with U.S. law enforcement agencies in order to obscure high level government corruption. It’s certainly no coincidence that the legislation referenced above was passed in the immediate aftermath of the arrest in Los Angeles of Mexico’s former defense minister on drug trafficking and corruption charges. In fact, both the New York Times and ProPublica have explored allegations “of potential links between drug traffickers and close confidants of the president.” According to ProPublica, U.S. drug-enforcement agents uncovered “what they believed was substantial evidence that major cocaine traffickers had funneled some $2 million to [López Obrador’s] first presidential campaign.” According to one ProPublica report, which should be noted for the sake of accuracy has been specifically denounced as ‘completely false’ by López Obrador, “the money was provided to campaign aides in 2006 in return for a promise that a López Obrador administration would facilitate the traffickers’ criminal operations.”
There is good reason, however, to be cautiously optimistic about the implications of Sheinbaum’s election on the security situation in Mexico. While López Obrador was scaling back cooperation with U.S. law enforcement, Sheinbaum, as mayor of Mexico City, quietly stepped out of his shadow and cultivated a strong relationship with U.S. law enforcement agencies in a strategy she has promised to replicate on a national level. In other words, if her record on security while she was mayor of Mexico City is any indication, she is likely to begin the process of restoring bilateral cooperation with U.S. law enforcement agencies like the DEA and finally put at least one feature of López Obrador’s failed strategy of “Hugs Not Bullets” out of its misery.
Of course, as noted in a recent Los Angeles Times article, the future of U.S.-Mexico relations “may depend less on who wins the Mexico election than on the outcome of the U.S. presidential race in November.” Any initiatives to restore cooperation on the drug war to pre-López Obrador levels could all come to an abrupt halt if Donald Trump, who has repeatedly threatened to engage in unilateral military action in Mexico, prevails in November.
Aldo Mena is a native El Pasoan who is interested in promoting various forms of solidarity and cooperation between elements of the Mexican American community and Mexican civil society. He is a graduate of the University of New Mexico where he received a B.A. in English and Political Science, and an M.A. in Latin American Studies with a research concentration in late colonial/early national period Mexican history. You can contact him directly at aldo@fronterizo.news.
The Perimeter is a column written by Aldo Mena, an El Paso News opinion columnist and founding writer at Fronterizo News.
