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Mexico Opposition Leading in Baja Race Helps Pact for Mexico

July 8 (Bloomberg) -- Mexico’s opposition parties were ahead in a key gubernatorial election, according to preliminary results, easing tensions within a multi-party pact that aims to aid the passage of economic reforms, Barclays Plc said.

The National Action Party, or PAN, in alliance with the Democratic Revolution Party, or PRD, were leading the race yesterday for governor of Baja California by 3 percentage points, the initial count shows. The PAN has governed the state since 1989. Elsewhere, Mexicans voted for mayors and local lawmakers in 15 states.

The campaign ahead of the elections had spurred accusations by the opposition of foul play by President Enrique Pena Nieto’s administration just as the parties negotiate key energy and tax bills as part of the so-called Pact for Mexico. While a final tally is needed to announce yesterday’s winner after the early count was questioned by the ruling Institutional Revolutionary Party, known as the PRI, the results in Baja California should strengthen the pact by reducing allegations of foul play, according to Barclays chief Mexico economist Marco Oviedo.

The results “remove an obstacle from the path to continue working on the reform agenda,” Oviedo said in a telephone interview. The leaders of opposition parties who’ve negotiated in the pact “were given a vote of confidence to continue working in the pact.”

Election officials reported technical problems with the preliminary count in Baja California and said they’ll wait for a full count of ballot boxes starting July 10 before announcing the winner.

The peso strengthened 1.5 percent to 12.8795 per dollar from 13.0762 per dollar on July 5.

Stalled Pact

The Pact for Mexico had stalled in April after the opposition alleged Pena Nieto’s PRI arranged to buy votes using government funds in the state of Veracruz. The groups patched up differences by creating measures to ensure the July 7 election would be free of vote rigging as part of an addendum to the pact.

Many of those measures weren’t followed, the PAN’s secretary-general, Cecilia Romero, said in an interview after the elections.

“We have to do an evaluation of the election results, of the irregularities and the behavior of the parties,” before deciding how to move forward with reform negotiations, Romero said. Still, as long as the pact “serves the country,” her party will remain a member, she said.

Baja California

The PAN has led Baja California since it became the first governorship to change hands from the PRI that had ruled every state for six decades.

Considered one of the last PAN bastions, any post-election conflict over the state “would not bode well” for the Pact for Mexico, Nomura Holdings Inc.’s New York-based strategist, Benito Berber, wrote in an e-mailed note today.

Pena Nieto has brokered an accord with major parties to pass bills to break the government’s monopoly on the oil industry and boost tax collection in efforts to double the pace of growth. He stressed today at an event in Mexico City his “unwavering disposition” to continue the dialogue with political parties to pass reforms.

The PRI enjoyed single-party rule for 71 years until the PAN won the presidency in 2000, only to lose to Pena Nieto in 2012.

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

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net.

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