AMLO Taps De La O as Finance Chief, Herrera Set for Banxico
(Bloomberg) -- Mexican President Andres Manuel Lopez Obrador said Wednesday he’s named long-time economic adviser and ally Rogelio Ramirez de la O as his finance minister, three days after the government lost congressional support in midterm elections.
Ramirez de la O will replace Arturo Herrera, who will be nominated to head the country’s central bank, known as Banxico, Lopez Obrador said on his Twitter account. The current Banxico governor, Alejandro Diaz de Leon, will leave in December.
Mexico’s peso weakened after the news, falling as much as 0.3% against the dollar but recovering much of the immediate loss afterward.
Ramirez de la O, who is 72, will likely encounter the same challenges faced by Herrera and his predecessor Carlos Urzua -- how to run a traditionally independent Finance Ministry under a president who has brought most aspects of government tightly under his control. But the appointment of a longtime confidant may signal that AMLO, as the president is known, is more willing to accept diverging voices in the government’s economic management.
“Ramirez de la O should mean a return to a more traditional minister of finance,” said Marco Oviedo, chief Latin America economist at Barclays Plc. “He probably would like to have more control over things, such as Pemex.”
He could have more heft than Herrera when passing budgets, Oviedo said, after Lopez Obrador’s Morena party lost its lower-house majority in June 6 midterm elections.
Lopez Obrador said the government would continue its austerity policy under the new finance minister. The president ignored calls from most private sector economists to increase spending to shore up the economy during the pandemic. GDP plunged 8.2% in 2020 but is rebounding faster than expected this year.
“We must all work together to make sure that the lessons learned during this pandemic are used to build a stronger economy that serves the entire population,” the incoming minister said in a video posted on Twitter.
Given AMLO’s reluctance to borrow and his costly support for ailing state oil firm Pemex, as Petroleos Mexicanos is known, Ramirez de la O may try to increase his budget by passing a tax reform, said Gabriela Siller, director of economic analysis at Grupo Financiero BASE.
He is a “Keynesian economist who knows the Mexican economy perfectly, both the public and the private sector, as well as investors,” said Gabriel Casillas, chief economist at Banorte.
Ramirez de la O, who predicted the 1994 peso devaluation, holds an economics PhD from Cambridge University. He was an adviser on Lopez Obrador’s 2006 presidential campaign. He has run the economic consultancy Ecanal since 1983.
While Herrera’s appointment to Banxico was expected, “he needs to work on his credibility as a central banker,” Oviedo said. “Not easy in a context in which the Fed will probably be preparing for normalization.”
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