Mexican Vote Rift Bad for Business

MEXICO CITY —  Political unrest is taking an economic toll in the Mexican capital, rattling investors and costing businesses millions in lost sales.

Observers say leftist presidential candidate Andres Manuel Lopez Obrador may be gaining momentum with his calls for a recount of the July 2 balloting. Results showing that he lost to conservative, pro-business rival Felipe Calderon by a whisker have been subject to allegations of vote tampering and dirty campaigning.

Street protests by supporters of Lopez Obrador, the popular former mayor of Mexico City, have intensified in recent weeks. His followers seized control of one of the capital’s main arteries Sunday, setting up tent encampments after a massive rally in the historic city center to pressure election officials to recount all 41 million ballots cast in the presidential contest.

Mexican financial markets sank Tuesday as the blockade that has bottled up the thoroughfare entered its third day, snarling traffic, paralyzing the downtown business district and setting tempers on edge. The nation’s IPC stock index, commonly known as the Bolsa, lost 122.73 points to close at 19,973.20, down 0.61%.

Mexico’s benchmark 10-year bond and its currency, the peso, weakened as uncertainty gripped the polarized nation.

“There is the risk that things could spin out of control and become violent,” said Latin America analyst Alberto Ramos, a senior economist with Goldman Sachs & Co. in New York. “The markets are pricing in that political risk.”

Business groups have estimated that companies along Mexico City’s elegant Paseo de la Reforma are losing between $9 million and $14 million a day now that protesters have shut a nearly 5-mile stretch of the normally bustling boulevard to traffic.

“We’re angry and we’re worried,” said Enrique Guerrero Ambriz, president of the National Chamber of Commerce in Mexico City. “This is causing grave problems” for thousands of companies.

Official tallies show that Calderon, who represents the National Action Party, eked out a 244,000-vote victory by a margin of 0.6%. Lopez Obrador’s Democratic Revolutionary Party has challenged those results in court, alleging fraud and illegal campaign tactics by Calderon supporters. A special electoral tribunal has until Aug. 31 to rule on the challenge and until Sept. 6 to declare a victor.

The protests here largely have been peaceful. The city’s commuters, accustomed to hellish traffic, so far are adjusting to the Paseo de la Reforma shutdown. Some analysts doubt that the civil disobedience in Mexico City, stronghold of the Democratic Revolutionary Party, will spread to other cities or have much effect on the larger economy.

“It’s a nuisance for a few elites who work in the banks” downtown, said Christian Stracke, an emerging markets analyst with New York-based CreditSights. “But it’s a fairly minor event relative to the size of Mexico’s economy.”

Indeed, the political tensions are casting a shadow over a burst of sunny news for Mexico’s economy. The government estimates that Mexico’s gross domestic product grew at a robust 5.2% annual rate in the second quarter, with the strongest job creation in nearly a decade. Record oil prices are translating into a tax windfall for the treasury while manufacturing exports grew last month at their fastest clip since the technology boom of 2000.

But businesses along the Paseo have little to celebrate.

A local hotel association estimated that reduced tourism alone is costing the city -- and its vast tourism-related workforce -- more than $12 million a day.

The Four Seasons hotel received 30 cancellations Monday, the first full day of the blockade, according to general manager Omar Sanchez.

“We hope that this is resolved quickly,” Sanchez said. The losses “will be grave,” he added, if the protests on Paseo de la Reforma continue.

Tourists and locals alike would hardly recognize the stately thoroughfare, home to famous museums, elegant shops and soaring office towers. It is typically packed with thousands of cars and buses shuttling to and from Mexico’s financial district and historic center.

On Tuesday morning, the boulevard was eerily quiet and virtually devoid of movement. The exceptions were the protesters reading newspapers under their makeshift tents and pedestrians trekking to their offices, some with backpacks instead of their usual briefcases. Police stood guard at the stock exchange and other key buildings.

Margaret Ramirez, a 36-year-old secretary for an insurance company, was indignant as she steered around garbage and protest banners to her office near the Museum of Anthropology.

“These people have no consideration,” she said. “It’s not fair that thousands are paying for the whims of a few.”

Taxi driver Armando Diaz was among those camping out. He said the tarps provided by the Lopez Obrador campaign offered meager shelter from the daily rain that pummeled Mexico City this time of year.

“But we don’t care,” he said. “We are going to demonstrate our support for Lopez Obrador, and we’re not going to falter.”