Photo: Pixabay

By KELIN DILLON

The Mexican Stock Exchange (BMV) has become the worst-performing stock exchange across the Americas in recent months, a decline experts say is caused by international concerns surrounding Mexico’s proposed reforms to the Judicial Power of the Federation (PJF) and its potential impacts on the country’s balance of power.

On Thursday, July 4, the BMV closed with 52,654 points at an accumulated annual loss of 8.2 percent, several points more than the 6 percent decline of Sao Paulo, Brazil’s Bovespa index, which had the second largest drop across the Americas for the period.

This starkly contrasts the BMV’s performance just months earlier when it hit a record 58,712 points on Feb. 7.

 “There was a significant correction in the Mexican stock market due to the uncertainty generated by the control of congress by the ruling party, and the possibility of approving reforms that could imply a destruction of the country’s institutional framework,” said Bursamétrica President Ernesto O’Farrill.

Meanwhile, the principle indexes for the United States, Argentina, Venezuela, Colombia, Peru and Canada closed with positive gains Thursday.

However, according to Rankia LATAM Chief Economist Humberto Calzada, the market’s reaction to the potential policies of Mexico’s President-elect Claudia Sheinbaum is an “overreaction” and will likely stabilize once Sheinbaum’s full presidential cabinet has been announced.

Likewise, Calzada noted that the upcoming U.S. presidential elections could significantly impact the BMV.

“The market is also waiting for the U.S. election, but I think that there could be a significant recovery in BMV if the path begins to smooth out and investors begin to have a sign of certainty and greater confidence because the issue of gross fixed investment continues to advance at a good pace,” said Calzada.

“If Donald Trump wins, we could see a scenario of strong volatility because we know about his protectionist policy and it could put the United States-Mexico-Canada Agreement in jeopardy; considering the progress that has been made with nearshoring, I think that all of this could cause a stir in the market,” concluded Calzada. “In Mexico, we have a lot of products with Chinese integration, and if Trump promises to impose a 10 percent tariff on everyone, he can go against our country with higher tariffs on products with Chinese sources.”