Mexico's President Claudia Sheinbaum gestures during her swearing-in ceremony at Congress, in Mexico City, Mexico, on Oct. 1.Raquel Cunha/Reuters
Claudia Sheinbaum was sworn in as Mexico’s first woman president on Tuesday, taking the reins at a time the country is struggling with violence from organized crime and a hefty deficit in Latin America’s No. 2 economy. Ms. Sheinbaum, the 62-year-old scientist and former mayor of Mexico City, was inaugurated in a ceremony in Mexico’s Congress for a six-year term lasting until 2030.
Her supporters chanted “President! President!” and “Long live Mexico!” after Ms. Sheinbaum took the oath of office in front of lawmakers. Political watchers and analysts predict Ms. Sheinbaum will urgently look to calm investors after the passing of a controversial judicial reform pushed by her predecessor Andrés Manuel Lopez Obrador.
Markets will be looking to Ms. Sheinbaum for “a predictable and investment-friendly policy and regulatory framework,” said Alberto Ramos, head of Goldman Sachs Latin American economic research.
“Disciplined management of the budget and of state-owned enterprises, progress on public security, and safe-guarding the integrity of key institutions will be key to preserving market sentiment and sovereign debt ratings,” Mr. Ramos said, emphasizing the importance of state energy firm Petroleos Mexicanos (Pemex).
The November presidential elections in the United States, Mexico’s largest trading partner, could add to market volatility, especially if former U.S. president Donald Trump, who has vowed to increase tariffs on Mexican goods, wins.
Ms. Sheinbaum’s government will present its first budget before Nov. 15, which is expected to be highly scrutinized for clues on whether Ms. Sheinbaum will make good on commitments to reduce the fiscal deficit to 3.5 per cent of gross domestic product from 5.9 per cent, where it is predicted to close the year.
Lopez Obrador, whose six-year term began in 2018, managed to double Mexico’s minimum wage, reduce poverty and unemployment, broaden the base of social programs and oversee a previous strengthening of the peso. Touting these successes boosted his popularity and helped usher Ms. Sheinbaum, his protégée, to a landslide victory in the June elections.
Ms. Sheinbaum, however, who has promised “continuity with change,” will inherit the largest budget deficit since the 1980s and lagging economic growth.
Experts have said Mexico’s economy will require a tax reform to increase revenues, though Ms. Sheinbaum has said publicly she does not plan a sweeping tax overhaul.
Instead, she has said she will pursue other options, including improving the efficiency of tax collection at customs.
Ms. Sheinbaum “will have to deliver an important fiscal consolidation if she wants to keep the positive view that markets have today towards her,” said Bernardo Keiserman, an economist at investment bank Bradesco BBI.
“We believe the government is committed to an adjustment, but delivering one sizable enough is not going to be an easy feat. The economy is weaker and likely weakening further,” Mr. Keiserman said. Recently, the central bank cut its GDP growth forecast for this year to 1.5 per cent from the previous 2.4 per cent and lowered its estimate for 2025 to 1.2 per cent.
The incoming administration will also inherit a heavy financial burden from state-owned Pemex, one of the most indebted oil companies in the world. Nearshoring, the trend of companies moving production closer to their main market, has helped Mexico attract investment, but Ms. Sheinbaum will face a challenge to increase foreign direct investment while implementing the controversial judicial reform passed in the dying days of Mr. Lopez Obrador’s presidency.
The judicial reform, under which judges will be elected by popular vote, has scared investors and drawn criticism from the U.S. ambassador to Mexico who said it threatened the rule of law.