Light poles are seen without power during an outage in Mexico's electricity network, in Ciudad Juarez.
In the report, JP Morgan said that Mexico faces risks to economic growth and potential for a credit rating downgrade in the medium term due to political developments including the likely passage of a controversial energy bill.
The bank said President Andr s Manuel L pez Obrador's plan to tighten state control of the electricity market could lead to ratings downgrades from Moody's and Standard Poor's. U.S. Energy Secretary Jennifer Granholm raised concerns about the risks to investors from the energy market initiative during talks with Mexican officials this week.
The JP Morgan report dated Thursday stressed that the energy bill will likely pass at some point this year, even if it isn't watered down. The opposition PRI party could support the legislation, potentially putting the opposition in opposition to Lopez Obrador.
The bill's approval could allow Lopez Obrador to increase the strength of the presidency and undercut the roles of independent institutions and regulators, JP Morgan economist Gabriel Lozano wrote in the report.
In addition to the bill's passage, Lopez Obrador is likely to get a boost from the gubernatorial victories for his Morena party as well as his own expected win in the recall referendum scheduled for April 10, according to Lozano.
He expects the Mexico Central Bank to boost interest rates to 7.25% this year and to 8% in 2023 from the current 5.5% level.
If there are doubts as to whether Banxico Mexico Central Bank should follow the Fed through 2023 or not, this year s political events will probably dictate the extent of the coupling, the bank said.