Mexico's own populist politician softens tone in bid for presidency

By Anahi Rama and Gabriel Stargardter

MEXICO CITY, (Reuters) - Mexico's home-grown populist Andres Manuel Lopez Obrador has tapped into wide discontent with the ruling party and resentment toward Donald Trump to make a bid for the center ground, raising his chances of winning the presidency next year.

The approval ratings of President Enrique Pena Nieto, from the Institutional Revolutionary Party (PRI), have been battered to as low as 12 percent by anemic economic growth, rising fuel prices and his failure to tame endemic graft.

And with U.S. President Trump threatening protectionist steps against Mexico to boost U.S. jobs and a border wall to deter illegal immigration, as well as inflation on the rise and gang violence surging at home, conditions favor Lopez Obrador, the runner-up in Mexico's past two presidential votes.

Lopez Obrador's folksy brand of leftist, Mexico-first rhetoric has put the former Mexico City mayor out front in opinion polls for the 2018 presidential election and at the forefront of popular resistance to Trump.

A victory for Lopez Obrador would mark a historic leftward shift in Mexico, Latin America's second-largest economy, where centrist technocrats have held sway for decades, and could complicate relations with top trade partner the United States.

Guadalupe Hernandez, a 42-year-old candy seller, attended a rally late last month for Lopez Obrador in the corn-growing village of Tlapanaloya in Pena Nieto's native State of Mexico, a PRI stronghold for nearly 90 years.

"I voted for (Pena Nieto) in 2012, but it's been like when your boyfriend promises you the stars - and then nothing," she said. Next time, she added, she was planning to vote for Lopez Obrador. "I think he will bring about change."

Capitalizing on the discontent, the veteran politician and longstanding U.S. critic travels to the United States on Sunday to support Mexican migrants and burnish his nationalist credentials with a message of cross-border solidarity.

Known as AMLO, the silver-haired 63-year-old made headlines after the 2006 presidential vote when he brought parts of the capital to a standstill with mass protests, saying he had been robbed of victory by center-right candidate Felipe Calderon.

Recently, though, the Mexican establishment's favorite bogeyman has moderated his rhetoric, hammering home his anti-corruption message and courting sections of the middle class who equate him with Hugo Chavez, Venezuela's former leftist leader.

Top aides consulted by Reuters struck a pro-market, free trade tone, touting what they call Lopez Obrador's newfound maturity, which includes support for Pena Nieto's stance against Trump. Those messages have calmed concerns of some Wall Street investors, such as Goldman Sachs.

"Lopez Obrador has always been a supporter of the market economy," said Hector Vasconcelos, Lopez Obrador's foreign policy chief.

'STATESMANLIKE'

Although he fought against Pena Nieto's divisive 2013 opening of Mexico's oil and gas market, which ended the state's energy monopolies, Lopez Obrador now suggests he could allow it to stand, but he would put the matter to a referendum.Pledging to run a tight budget without raising taxes, he defends the North American Free Trade Agreement that Trump has threatened to tear up. The NAFTA deal has long been a target of Mexico's left, but that position has changed given the potential for economic upheaval if Trump follows through on his threat.

"It's not about saying goodbye to it," Lopez Obrador said recently. "(Trump) is not going to be able to recover jobs by preventing free trade with Mexico."

The fact Lopez Obrador's National Regeneration Movement (Morena), a party he registered in 2014, is unlikely to gain a majority in Congress has helped soothe concerns he could push through changes that critics say could hurt the economy.

Lopez Obrador has also pledged to broaden access to education, raise wages and pensions, build new refineries and ditch a planned Mexico City airport.

And although fund managers and economists say he remains a question mark for their clients, some seem more receptive.

"In recent weeks AMLO has moderated his public stance, reached out to local business leaders and acted in a statesmanlike manner while appearing presidential by openly supporting the Pena Nieto administration in its recent dealings with the Trump administration," Goldman Sachs said in a note this month after a recent visit by analysts to Mexico.

In a further boost, both the PRI and the center-right opposition National Action Party have yet to coalesce around a candidate, leaving him unimpeded. Pena Nieto is constitutionally barred from seeking re-election.

Trump offended Mexicans from the first day of his presidential run in June 2015, when he talked of Mexico sending drugs, crime and rapists to the United States. Analysts on both sides of the border say the new Republican president is a boon to a committed Mexican nationalist.

"Discontent with Pena Nieto could increase voter support for ... Lopez Obrador, a leftist populist who is unafraid to antagonize the United States," the U.S. Congressional Research Service wrote in a Feb. 1 paper.

Javier Jimenez, AMLO's shadow transport and communications minister during his 2012 presidential bid, agreed.

"By hurting Mexico, (Trump) is indirectly helping Lopez Obrador," he said. "(AMLO) is a man who today, is a lot more mature. He is a highly adequate choice given the current situation and the failure of the other options."

(Additional reporting by Roberto Aguilar and Noe Torres; Writing by Gabriel Stargardter; Editing by Dave Graham and Frances Kerry)

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