Mexico's Next Finance Minister Pledges Broad Fiscal Discipline

(Bloomberg) -- An adviser for Mexico’s next president, Andres Manuel Lopez Obrador, held a call early Monday morning to reiterate the new government will be fiscally responsible.

Carlos Urzua, Lopez Obrador’s pick for Finance Minister, said the new administration will strictly respect the autonomy of the country’s central bank and that the floating exchange rate regime will continue, as it has proven to work over the years.

"We’ll have an extremely responsible macro, fiscal and debt policy management," Urzua said on the call. "We strongly believe that the tax, financial regulatory agencies need to be managed in a transparent matter and with a clear risk-based management policy."

Lopez Obrador was elected as Mexico’s first left-wing president in recent times, and his party’s coalition also looks poised to pick up scores of seats in Congress, with some polls indicating that it may actually take a majority in both legislative chambers. That created jitters among investors who worry about what policies the new administration will enact. The call, held in English, was meant to assuage some of those fears.

Urzua said Arturo Herrera, a World Bank executive, will join the transition team. Herrera and economic advisor Gerardo Esquivel are expected to take leadership roles within the Finance Ministry, he said.

The five-month transition period will be an opportunity to prepare the budget, which will be sent to Congress on Dec. 15, Herrera said. The transition team expects to work with the current government in the upcoming review of a credit line with the IMF in November to support the request to renew it, he said.

The new administration will be the refocusing resources towards public investment, Urzua and Herrera said. "In the medium and long term, we have to change course; we have to start with more investment," Urzua said. "We have to have at least 5 percent of GDP in public investment - we are going to welcome any private investment, domestic and foreign. We’d like to have a very friendly environment for investors around the world."

On the structural reforms approved during Enrique Pena Nieto’s administration, Urzua said they’d need to go through consultation. "We need to create consensus around the reforms and process them through the proper institutional channels," he said.

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