Mexico Postpones Contentious Banxico Bill Until February

(Bloomberg) -- Mexican lawmakers have postponed until February debating a controversial bill that would have forced the central bank to buy possibly-illicit dollars, providing respite on a proposal that triggered fierce opposition from Banxico, private banks and the country’s most powerful business lobby.

After frenetic negotiations on Tuesday morning, the lower house decided to delay voting on the bill until next year, congressional leaders said in a video conference Tuesday. The bill would require the central bank, known as Banxico, to buy excess dollars from domestic banks that can’t offload them elsewhere because of U.S. money-laundering controls. Its opponents say it would flood the central bank with dollars from illicit activities, including drug trafficking.

The Mexican peso jumped on the announcement, which removed a roadblock that had temporarily interrupted the currency’s recent gains, and was the best performer among the world’s top currencies on Tuesday.

The bill remains up for discussion and will be tackled by lawmakers, banks, and policy makers in January, senate majority leader Ricardo Monreal said in the video conference. Monreal, who pushed the bill through his chamber last week, said lawmakers still want better conditions for Mexican migrants to send remittances home -- the initial stated aim of the bill.

“Additional adjustments to the bill are very likely, meaning that the approval process will still take more time,” XP Investments strategists Andres Pardo and Tomas Arias wrote in a research note. “Its final form, if approved, may include material changes to the original bill.”

Finance Minister Arturo Herrera backed the postponement. “It seems they have taken the right measure to give space for a deeper and more technical discussion,” Herrera wrote on Twitter. At a conference earlier in the day, he called for a solution that doesn’t infringe on central bank autonomy.

Read More: Mexico Billionaire Supports Forcing Central Bank to Buy Dollars

The central bank, which says only 1% of remittances sent home from workers living abroad is in cash, has said it was open to working with lawmakers to find a solution but also left the option of taking the case to the Supreme Court in case the bill was approved. After Tuesday’s postponement, Banxico reiterated that it’s willing to work with lawmakers on potential alternatives that respects its autonomy.

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