(Bloomberg) -- Mexican President-elect Andres Manuel Lopez Obrador and his allies are quickly showing that they’ll put the people over business interests -- even if it risks jarring investors.
The country’s stocks, bonds and currency plunged Thursday after the Senate leader for Lopez Obrador’s Morena Party introduced a bill to eliminate certain fees and commissions charged by banks. While such a move would be welcome in many corners of the country, it came as a surprise to a business community that was already reeling from the president-elect’s decision 11 days ago to scrap a $13 billion airport project.
The politician known as AMLO has always somewhat unnerved investors with his leftist agenda, but the latest actions by him and his party have left them wary of what comes next. After taking smiling photographs with executives in the first four months of his presidential transition, Lopez Obrador in the past two weeks has challenged them like no other leader in recent memory.
The bank-fee move “is in line with the airport message: There is a new president in town, and he is going to make sure things change,” said Carlos Bravo, a political scientist at Mexico City’s Center for Economic Research and Teaching. “Lopez Obrador is trying to restore some degree of political autonomy to the presidency vis-a-vis economic powers.”
It isn’t only Lopez Obrador’s economic and financial decisions that are causing concern.
He’s drawn widespread condemnation for plans to have Nicolas Maduro, the deeply unpopular president of a crisis-stricken Venezuela, attend his inauguration on Dec. 1. The hashtag “Maduro, you’re not welcome” trended on Twitter, with the Institutional Revolutionary Party and National Action Party, who have governed since the early 20th century, demanding that Lopez Obrador withdraw the invitation.
Outgoing President Enrique Pena Nieto’s government has taken a leading role in condemning the May vote that extended Maduro’s presidency and calling for Venezuela to hold free elections. Lopez Obrador has defended Maduro’s presence at his swearing-in, saying that his administration will aim to be a friend to all nations.
While Lopez Obrador has spoken publicly several times since the airport decision and tried to calm concerns, even these efforts have been tinged with the same message of dominance of business elites. In a video message, he appeared alongside a stack of books that was topped by one titled “Who’s in Charge Here?” by authors including former Spanish Prime Minister Felipe Gonzalez, an analysis of the ways in which governments globally have failed to represent the interests of their voters.
He was even more explicit at a press conference about the airport cancellation. “This is a sample,” he said. “We didn’t allow pressure from anyone. It’s evident that from now on there is a clear division, a frontier between economic power and political power.”
The bill introduced Thursday calls for the elimination of fees on ATM cash withdrawals and balance requests, as well as commissions charged for printing balances and transfers to other banks. Mexico’s benchmark stocks index fell 5.8 percent, the biggest one-day drop since 2011. Grupo Financiero Banorte SAB, the nation’s largest publicly-traded bank, led the losses with a 12 percent tumble. The peso lost 1.6 percent.
Ricardo Monreal, the Senate leader for Lopez Obrador’s Morena party, told reporters late Thursday that he won’t rush the initiative through Senate commissions before hearing all points of view on the issue. It could be changed, modified or improved through debate, he said, while insisting that the banking fees charged to Mexicans are too high.
“We don’t want to be classified as a parliamentary group that’s against the economy, against economic groups, against investors,” he said.
While the elimination of fees jolted markets, it would be good for the nation’s citizens.
“Mexican bank users were being ripped off with those fees, with previous governments doing nothing to curb the obvious abuse,” Bravo said.
In a report released in July, Mexico’s National Commission for the Protection and Defense of Financial Services Users, known as Condusef, found that the largest foreign-owned banks took a greater percentage of their revenue from fees in Mexico than in their home countries.
For instance, Madrid-based Banco Santander SA received 39 percent of its Mexican revenue from commissions, compared with 20 percent in Spain. The same trend was more or less true for Banco Bilbao Vizcaya Argentaria SA, Citigroup Inc., HSBC Holdings Plc and Bank of Nova Scotia.
For investors, the issue is less the substance of this particular bill and more what it says about the new leadership.
“The main market concern is that this could potentially signal a more interventionist inclination,” said Alberto Ramos, an economist at Goldman Sachs Group Inc. That “could lead to further policy and regulatory steps to encroach in an investment-unfriendly manner on private-sector activity.”
--With assistance from Justin Villamil and Juan Pablo Spinetto.
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