Mexico Peso Weakens After State Election Too Close to Call

(Bloomberg) -- Mexico's peso fell after the governor's election for the key State of Mexico on Sunday was headed down to the wire as an exit poll showed the candidate for the ruling PRI party and that of presidential hopeful Andres Manuel Lopez Obrador were statistically tied.

The peso depreciated 0.4 percent, the most among major currencies tracked by Bloomberg, after PRI candidate Alfredo del Mazo and Morena candidate Delfina Gomez were within the margin of error in an El Financiero Bloomberg TV exit poll. The vote in Mexico State has become a straight fight between the two, according to polls before the election. Balloting ended at 6 p.m. local time for the state's roughly 11.3 million voters.

This spells trouble for the PRI. It hasn't lost the governorship in nine decades, and is grappling with President Enrique Pena Nieto's record-low popularity that's hurt the party's hopefuls pitted against populist outsider Lopez Obrador in early voter opinion polls. The PRI's del Mazo is the son of one former governor of the state and grandson of another. Gomez of Morena was an elementary school teacher before becoming mayor of Texcoco, a town northeast of the capital that's been enveloped by its sprawl.

Luis Carlos Ugalde, a former top electoral official who runs Integralia Consultores said exit polls in Mexico aren't very accurate because the rate of those who decline to respond is higher than 20 percent. Those who decline are usually from opposition parties and this could mean that Morena is doing better than the exit poll suggests, Ugalde said.

"Those who don't want to talk are usually skeptical or afraid," Ugalde said in an interview. "Those who stay quiet are those who would normally vote for Morena,"

Markets have been watching the race closely, and the peso wobbled on May 31 after one survey showed Morena's Gomez in the lead. With the country's political history in mind, some investors are concerned that a win in Mexico State could boost the chances for Lopez Obrador, who has strongly criticized the opening of the country's energy industry to private investment.

Read more: If Mexico's Ruling Party Can't Win Here, It's Probably Doomed

But state and national polls suggest voters' focus lies elsewhere. A gasoline price hike of as much as 20 percent in January triggered nationwide protests and has been a major catalyst behind Pena Nieto's drop in popularity. A surge in the homicide rate has 2017 on track to being deadliest year for Mexico this century -- surpassing even the height of the drug war --- with women increasingly likely to be a victim.

Meanwhile, corruption has also emerged as a key element of the race, with all of the state's televised debates featuring candidates hurling accusations of graft at one another. Voters' attention to the issue has intensified after Pena Nieto and his family were enmeshed in an influence-peddling scandal.

The headline numbers for Mexico's economy suggest the PRI should be doing better. Under Pena Nieto, the economy has avoided recession and grown at about 2.3 percent a year -- unspectacular by emerging-market standards, but solid enough by comparison with Latin peers such as Brazil or Argentina, let alone Venezuela. Energy reforms have succeeded in attracting billions of dollars of foreign investment.

Apart from the vote in Mexico State, which borders the nation's capital, gubernatorial elections are also taking place Sunday in Coahuila and Nayarit. The PAN party was poised to win the governorship of Nayarit, according to the exit poll by El Financiero Bloomberg TV.

To contact the reporter on this story: Nacha Cattan in Mexico City at ncattan@bloomberg.net.

To contact the editors responsible for this story: Vivianne Rodrigues at vrodrigues3@bloomberg.net, Carlos Manuel Rodriguez