AMLO’s Finance Minister Pick Sees Inflation Between 4-5% Next Year

(Bloomberg) -- Mexico’s likely next finance minister Carlos Urzua said that he sees Mexico’s 2019 inflation between 4 and 5 percent, quite a departure from the current government’s 3 percent preliminary projection.

Urzua, a former academic who ran Mexico City’s finances under then-mayor Andres Manuel Lopez Obrador spoke in a wide-ranging interview broadcast on Televisa. He said that the government is expecting GDP growth around 2.5 percent next year, and that he sees the Mexican peso appreciating to 19 pesos per dollar -- a 2.5% gain from current levels.

Urzua also says that gasoline prices will not suffer abrupt fluctuations, and they will increase in line with inflation. Considered by many to be a debt hawk, he highlighted the importance of not putting pressure on budgets: if planned expenditures for social programs exceed targets, they will cut spending or adjust programs.

Analysts see inflation at 3.65 percent for the end of 2019, according to the median forecast in a survey published Monday by the Central Bank.

The likely finance minister said that pains would be taken to respect the independence of the central bank, and he said that when the term of some deputy governors in Banxico expire Lopez Obrador will propose new members to the Senate.

A central bank pick will have "a completely technical profile with a deep knowledge of monetary policy," Urzua said. "Someone who is very well known by financial markets."

He also touched on one of the key hot-button issues during the campaign, saying that there are three scenarios being considered for the new Mexico City airport. He said that perhaps the easiest way to finish the project would be through a concession.

Urzua said that Gerardo Esquivel would likely be appointed deputy finance minister. He also said he expects the Mexican oil barrel may trade around $70 next year.

©2018 Bloomberg L.P.