AMLO Taps Mexican Treasurer Borja to Banxico in Dovish Tilt

Mexican President Andres Manuel Lopez Obrador nominated the treasurer of the country’s Finance Ministry as the next deputy governor of the central bank in what may be a dovish shift for the famously hawkish institution.

Galia Borja Gomez will replace Javier Guzman early next year, leaving the outgoing policy maker to weigh in on one final rate decision next week before his departure. AMLO, as the president is known, announced the appointment in his daily press conference early Monday as part of a number of personnel changes in his government.

Borja, who analysts say is a close ally of Finance Minister Arturo Herrera, would become the central bank’s second female deputy governor after Irene Espinosa, representing between the two 40% of the board’s votes. Espinosa also was plucked from the role of treasurer at the Finance Ministry in 2018. The president’s previous two picks, Gerardo Esquivel and Jonathan Heath, have already changed the balance of the five-member board, and a potential dovish tilt with Borja marks a new era for the bank.

AMLO Taps Mexican Treasurer Borja to Banxico in Dovish Tilt

“Given her current job, she’s more likely to be worried about growth than about inflation,” said Benito Berber, the chief Latin America economist at Natixis North America in New York. “You have the hawk Guzman leaving and most likely a dove joining the board -- that will likely translate into a re-start of the cutting cycle.”

Mexico’s senate still must vote to approve the choice, though the step is largely a formality as Lopez Obrador’s Morena party controls the chamber along with allies.

Cautious Path

Banco de Mexico, known as Banxico, has followed a cautious path over the course of the Covid-19 pandemic, even as nations across the developing world slashed interest rates to contain the economic fallout. The bank held borrowing costs steady at 4.25% in its last decision in November, maintaining the real rate -- which is adjusted for inflation -- positive.

While Banxico’s more dovish wing has largely joined the majority in supporting a measured easing cycle, Heath and Esquivel have occasionally highlighted the need for faster and deeper cuts to help Latin America’s second-largest economy. If ratified by the senate, Borja will vote on the bank’s first rate decision of 2021 on Feb. 11.

Under the administration of Lopez Obrador, the central bank has taken on an increasingly central role in the nation’s pandemic response. The president has steadfastly opposed any major fiscal stimulus.

New Minister

Separately, Lopez Obrador also said lawmaker Tatiana Clouthier, who played a key role as his campaign’s coordinator in the 2018 election, will become Economy Minister, replacing Graciela Marquez. The announcement comes days after Alfonso Romo, a multimillionaire businessman who was the key liaison between the government and the private sector, stepped down from his post as AMLO’s chief of staff.

“Tatiana is a woman of principle, integrity, honest and will help us to continue promoting the economic activity in the country and have good relationships with the business sector,” AMLO said about her appointment Monday.

©2020 Bloomberg L.P.

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