The recent decline in the iShares MSCI Mexico ETF (EWW) and the Mexican peso is related to the outcome of Mexico’s presidential election. Claudia Sheinbaum, the former mayor of Mexico City and the presidential candidate for the ruling Morena party, won a landslide victory in the election. The Morena party secured a supermajority in Congress, which has raised investor concerns. They worry that this majority could lead to constitutional changes, including reforms proposed by outgoing President Andres Manuel Lopez Obrador. These reforms might significantly alter Mexico’s political landscape, affecting areas such as the judiciary, pensions, electoral law, and energy-sector regulations. As a result, the EWW ETF, which tracks Mexican equities, suffered its largest daily decline in over four years, sliding 10.7% on Monday, while the Franklin FTSE Mexico ETF (FLMX) also had its worst day in nearly four years, declining 10%. The Mexican peso also weakened significantly against the U.S. dollar1. The situation reflects the uncertainty surrounding potential policy changes in Mexico following the election results.
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