Fresh Scandal Shakes Mexico's Ruling Party Before Election

(Bloomberg) -- The arrest of the former treasurer of Mexico’s ruling party is the latest scandal to rock President Enrique Pena Nieto’s political group ahead of elections in which popular demand for a clampdown on corruption may play a defining role.

Alejandro Gutierrez, who controlled the accounts of the party known as PRI, was arrested on Wednesday on allegations he orchestrated a financing scheme to funnel public money to political campaigns. The peso fell to the weakest level in nine months as investors worry the scandal may boost the prospects of left-leaning candidate Andres Manuel Lopez Obrador.

A growing list of top PRI officials, from governors to the former CEO of state oil giant Pemex, have come under scrutiny in recent months amid corruption accusations. The party faces a presidential race with dismal approval ratings, control over fewer states than ever before, and with at least eight of its current or recent governors under investigation or in jail. The party’s press office hasn’t responded to a request for comment by Bloomberg.

Gutierrez and other government officials created ghost contracts with shell companies to access funds that were sent back to the PRI to use in the 2016 elections, Reforma newspaper reported earlier this week. Bloomberg couldn’t immediately locate his lawyer for comment.

His arrest is also a reminder that, while the PRI controls the Federal Attorney General’s office, cases developing in regions where opposition governors have more influence may escalate, reaching national figures. The former PRI governor of Chihuahua, where this case takes place, fled to the U.S. to avoid prosecution in Mexico and his arrest is pending.

Graft scandals are denting the performance of the peso, one of the most liquid currencies among emerging markets. It dropped 0.8 percent in early Thursday trade, the biggest decline among the world’s major currencies. 

"The main issue against the PRI for the electoral period is corruption,” says Ociel Hernandez, an analyst with BBVA in Mexico City. "And more issues will continue to surface."

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