Mexican President-elect Andres Manuel Lopez Obrador speaks during a press conference at the National Palace in Mexico City after holding a meeting with President Enrique Pena Nieto, on July 3, 2018 / AFP / ALFREDO ESTRELLA
Mexican President-elect Andres Manuel Lopez Obrador speaks during a press conference at the National Palace in Mexico City after holding a meeting with President Enrique Pena Nieto, on July 3, 2018 / AFP / ALFREDO ESTRELLA
Mexican President-elect Andres Manuel Lopez Obrador speaks during a press conference at the National Palace in Mexico City after holding a meeting with President Enrique Pena Nieto, on July 3, 2018 / AFP / ALFREDO ESTRELLA
Mexican President-elect Andres Manuel Lopez Obrador speaks during a press conference at the National Palace in Mexico City after holding a meeting with President Enrique Pena Nieto, on July 3, 2018 /

The Americas

Mexico authorities mulling $10 million fine for election victors

The National Regeneration Movement won a majority in Sunday's election

Reuters

July 05, 2018

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Mexican President-elect Andres Manuel Lopez Obrador’s party could face a $10 million (DH36.97 million) fine for violations of campaign finance rules, the national electoral institute said on Wednesday following the group’s wide-reaching election victory.

Lopez Obrador, a former Mexico City mayor who has vowed to root out corruption and make government contracts transparent, on Sunday won by a landslide while his leftist National Regeneration Movement (MORENA) took an outright majority in Congress.

The possible fine of more than 197 million pesos (DH37.4 million), slated to be put to a vote by the National Electoral Institute (INE) on July 18, would be the largest related to campaign financing for the recently concluded election season.

It is nearly as much as the 207.5 million pesos (DH39.49 million) authorized by INE as MORENA’s public financing for campaign spending in 2018 federal elections.

MORENA’s representative at the institute did not immediately respond to a request for comment.

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According to INE, MORENA formed a trust that it did not report in which it deposited, mostly through cash deposits, about $4 million (DH14.69) as well as checks and bank transfers.

“The party actively participated in forming this financial instrument to collect resources as a financing method contrary to the rules,” INE said in a statement on Wednesday.

It said the estimate of a possible fine was based on omissions in MORENA’s fiscal report as well as exceeding cash contribution limits and receiving funds from unknown persons and prohibited entities.

Two sources with knowledge of the matter said the trust under investigation was called “For the Others,” set up by MORENA to help victims of last September’s devastating earthquakes.

INE said about $3 million (DH11) was withdrawn from the trust, distributed in checks to party members and were cashed later.

The INE began its investigation after the ruling Institutional Revolutionary Party filed a complaint claiming MORENA had launched the fund without reporting it to authorities.

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Will the pound fall to parity with the dollar?

The idea of pound parity now seems less far-fetched as the risk grows that Britain may split away from the European Union without a deal.

Rupert Harrison, a fund manager at BlackRock, sees the risk of it falling to trade level with the dollar on a no-deal Brexit. The view echoes Morgan Stanley’s recent forecast that the currency can plunge toward $1 (Dh3.67) on such an outcome. That isn’t the majority view yet – a Bloomberg survey this month estimated the pound will slide to $1.10 should the UK exit the bloc without an agreement.

New Prime Minister Boris Johnson has repeatedly said that Britain will leave the EU on the October 31 deadline with or without an agreement, fuelling concern the nation is headed for a disorderly departure and fanning pessimism toward the pound. Sterling has fallen more than 7 per cent in the past three months, the worst performance among major developed-market currencies.

“The pound is at a much lower level now but I still think a no-deal exit would lead to significant volatility and we could be testing parity on a really bad outcome,” said Mr Harrison, who manages more than $10 billion in assets at BlackRock. “We will see this game of chicken continue through August and that’s likely negative for sterling,” he said about the deadlocked Brexit talks.

The pound fell 0.8 per cent to $1.2033 on Friday, its weakest closing level since the 1980s, after a report on the second quarter showed the UK economy shrank for the first time in six years. The data means it is likely the Bank of England will cut interest rates, according to Mizuho Bank.

The BOE said in November that the currency could fall even below $1 in an analysis on possible worst-case Brexit scenarios. Options-based calculations showed around a 6.4 per cent chance of pound-dollar parity in the next one year, markedly higher than 0.2 per cent in early March when prospects of a no-deal outcome were seemingly off the table.

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