AMLO’s New Money Man Faces the Challenge of Standing Up to Him

(Bloomberg) -- For a man being introduced as Mexico’s new finance minister, Arturo Herrera looked anything but comfortable. In a video that immediately went viral, he could be seen standing stiffly beside President Andres Manuel Lopez Obrador, eyes darting about as though looking for the nearest exit.

The job was never going to be easy. Mexico is facing slowing growth, budget constraints, concerns over credit worthiness and an unpredictable and volatile relationship with its biggest trading partner.

But to Mexico watchers, the viral video of Herrera waiting nervously as the president spoke for five minutes told of another, perhaps more pressing, challenge for Herrera: How do you convince a president who seems to want to call all of the shots?

The logic goes that if Carlos Urzua, a close friend of AMLO, as the president is known, resigned Tuesday as finance minister because of major differences with the administration, Herrera’s chances of successfully standing up to the president appear even slimmer.

“It’s clear by now that the president is the one giving the guidelines for economic policy in general and fiscal policy in particular,” said Carlos Capistran, chief Mexico and Canada economist for Bank of America. Herrera is “going to try and keep the fiscal targets as much as he can, but at the end of the day he’s going to have to implement the policies that AMLO dictates.”

Precedents, Foundation

In a country where power is concentrated in the chief executive, the finance minister is a rare exception of independence and authority. Bloomberg columnist John Authers likened the position to a goalkeeper and said Urzua’s rationale for stepping down -- his letter of resignation cited economic decisions that lacked foundation -- feeds into the worst fears of investors and makes credit rating downgrades “very likely.” Bond yields soared following the news, even as the peso recovered about half of its losses since the resignation.

Bloomberg Economics - Mexico: External Headwinds, Questionable Policies

But some close to AMLO say he isn’t all that stubborn. Rogelio Ramirez de la O, an economist who advised him when he ran for president in 2006, said AMLO is seeking real change and whomever interprets and presents that effectively is going to be able to persuade him. “The mandate is to separate government decisions from economic groups’ interests, so that they ensure no bias away from what’s rational and competitive,” he said. “It’s not just what AMLO wants, he really has a political mandate to carry out.”

Campaign Pledges, Convictions

AMLO took office in December on the promise of clamping down on corruption and pulling Mexicans out of poverty. Proper packaging of ideas is also important to convince the president, Ramirez de la O added. AMLO said at his daily news conference Wednesday that he didn’t agree with Urzua’s national development plan and had to re-write it because it looked too similar to what had been proposed by past administrations.

Asked what he’d do if he’s told there’s no money for one of his pet projects, like an $8 billion refinery, AMLO said he’d convince Herrera that it was possible. When Herrera was deputy minister, before his promotion, he told the Financial Times that refinery construction would be delayed, only to have AMLO say hours later that wasn’t the case.

Herrera now says he wasn’t properly cited by the media. In an hour-long news conference following the joint appearance with AMLO, the new finance minister appeared far more relaxed. He assured Mexico that he has the respect and ear of the president, whom he’s known for almost two decades. While Urzua had served as Mexico City’s finance secretary when AMLO was the city’s mayor at the start of the last decade, Herrera for his part had held the same post later on in the same administration.

Herrera quipped to local media that even though AMLO has persuaded him on one point or other over the years, he’s also managed to do the same with AMLO. He explained that he’d kept a serious face in the video of his introduction Tuesday so as to try and live up to the solemnity of the event. “It was an unusual way of announcing a naming, in line with the times,” he said. “I was trying to be solemn, to behave appropriately for the event.”

To contact the reporter on this story: Nacha Cattan in Mexico City at ncattan@bloomberg.net

To contact the editors responsible for this story: Juan Pablo Spinetto at jspinetto@bloomberg.net, Robert Jameson

©2019 Bloomberg L.P.