Mexico Ruling Party on Track for Narrow Win in Crucial State

(Bloomberg) -- President Enrique Pena Nieto’s party appeared to pull off a narrow victory in the election for governor of Mexico’s largest state, according to preliminary results, throwing it a lifeline ahead of next year’s general vote.

An initial count showed the Institutional Revolutionary Party, rulers of the State of Mexico for nine decades, fended off a populist threat from an upstart party that didn’t exist when the PRI coasted to victory six years ago. Alfredo del Mazo received about 34 percent of the vote, compared with 31 percent for Morena’s Delfina Gomez, with almost 98 percent of votes counted. The news bolstered the Mexican peso, which rose the most among emerging markets currencies.

The results show the ruling PRI is barely holding onto its heartland and a state vital to winning next year’s presidential vote. Pena Nieto rode the governorship to the presidency, and in the election to succeed him in 2011 his party’s candidate received two thirds of the vote. This time however, Mexicans handed the strongest showing to date to Andres Manuel Lopez Obrador, who leads Morena and has strong support in early polls for next year’s presidential race.

"The result is an oxygen tank that will allow the PRI to position itself for 2018, although I still don’t see how they can win," said Alejandro Schtulmann, president of Mexico City-based political-risk advisory firm Empra. "Morena now has the strength of voters in the State of Mexico and Mexico City, but at the end of the day Lopez Obrador still lacks money and resources, which were what he wanted."

Del Mazo is the son of one former governor of the state and grandson of another. Gomez was an elementary school teacher before becoming mayor of Texcoco, a town northeast of the capital that’s been enveloped by its sprawl. The PRI hasn’t lost the state of 16 million people in nine decades.

Luis Carlos Ugalde, a former top electoral official who runs Integralia Consultores, said the election results are at risk of being overturned. If the vote is close enough, Lopez Obrador and other opposition parties may be able to successfully argue that the alleged use of federal funding helped clinch the PRI’s win, he said.

In a TV interview with Televisa on Monday, Morena’s Gomez said that her party would not go to the streets to contest the results of the State of Mexico gubernatorial election and would use legal means to make sure the democratic process is respected. Lopez Obrador supporters shut down streets in Mexico City in 2006 to protest what they said was a stolen election after he lost to Felipe Calderon.

Markets have been watching the race closely, with some investors 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. After initial losses, the peso rose as much as 1.9 percent on Monday.

In addition to Mexico State, which borders the nation’s capital, gubernatorial elections also took place Sunday in Coahuila and Nayarit. The PAN party was poised to win the governorship of Nayarit, while preliminary counts for Coahuila were too close to call.