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AmericasMay 1 2006

On the brink of disaster?

A crisis lies in waiting for Mexico in the shape of its frontrunning presidential candidate. Karina Robinson reports from Mexico City on the likely risk scenarios.
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Mexico is heading towards a crisis. As Andrés Manuel López Obrador, the charismatic former mayor of Mexico City, journeys towards the presidency, foreign investors look set to focus on what AMLO, as he is known, will mean for the country’s risk profile and economic growth.

Chastened by their losses from betting against Luiz Inácio Lula da Silva before he came to government in Brazil by selling the country’s bonds and currency, they are overly cautious in judging the Mexican frontrunner, who boasts a lead over his nearest rival of between seven and 10 percentage points, depending on the poll. But as his policies and governance style are publicised more abroad, those same investors may well sell the securities after a short-lived boom, send the peso into downfall and cause a major crisis in a globalised economy where imports and exports equal about 70% of gross domestic product (GDP).

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