The Mexican president will increase the minimum wage 20% before the elections

Mexico will raise the minimum wage by twenty% starting Jan. 1, President Andrés Manuel López Obrador announced Friday, pressing ahead with a popular policy among his working-class electoral base ahead of June’s presidential election.

The increase will mean that the minimum wage will have doubled in real terms since the beginning of López Obrador’s mandate at the end of 2018. The minimum daily wage for Mexican workers will be 249 pesos (US$14.4), or 7,508 pesos per monththe president said in his daily press conference.

“This is historic”said AMLO, as the president is known. “We are going to fulfill what we offered at the beginning of our Government.”

Mexico has increased the minimum wage —which is established by an agreement between the Government, unions and company representatives— in double digits during López Obrador’s five years in power.

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The measure “highlights the election cycle we are currently in and how popular these policies can be,” Rodolfo Ramos, Bradesco BBI strategist, wrote in a note. “For future years, minimum wage policy will largely depend on the outcome of the election, but regardless of who wins, we expect to continue to see large real increases in the minimum wage.”

Inflationary risks

The policy has helped support local demand, but at the same time, it is a complicating factor in the central bank’s task of curbing inflation to its target of 3%, plus or minus one percentage point. The country recorded inflation of 4.3% in the first half of November, compared to the same period of the previous year, compared to 4.25% at the end of October.

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“This can reinforce the high persistence that we have observed in core inflation, putting a limit on how much it can continue to fall next year,” said Jessica Roldán, chief economist at Finamex Casa de Bolsa, referring to an important indicator of inflation. which excludes volatile prices such as fuel. “We estimate that this will end up very close to 4% at the end of 2024.”

Mexico will hold presidential elections in 2024 in a race that has the candidate of AMLO’s party, Claudia Sheinbaum, as the favorite. The president is not allowed to run for re-election after ending a single six-year term.

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