March 1, 2021

Waiver of Finance Minister puts into question economic model of Mexico

The surprise resignation on Tuesday of the Mexican Minister of Finance and Public Credit, Carlos Urzúa, calls into question the economic policy of the Government of Andrés Manuel López Obrador and evidences internal fissures of the Executive.

Urzúa, recently arrived from the G20 summit in Japan, presented his letter of resignation in which he alleged "economic discrepancies" with the president and criticized that the government has "made public policy decisions without sufficient sustenance."

"I am convinced that all economic policy must be based on evidence, taking care of the various effects that this may have and free of all extremism," he said.

Some convictions that, he said, "did not find echo" in the Government of López Obrador, who assumed the presidency on December 1, 2018.

He added that it was "unacceptable to impose officials who have no knowledge of the Treasury," a fact that "was motivated by influential figures of the current government with a patent conflict of interest," he said.

A few minutes later, López Obrador appointed as substitute the until now undersecretary of Finance, Arturo Herrera, and defended the economic policy that is carried out.

"He (Urzúa) is not happy with the decisions we are making but we are committed to changing the economic policy that has been imposed for 36 years," said Lopez Obrador, very critical of "neoliberalism."

The president claimed that he wants to carry out a "transformation" of the country and admitted that "there is sometimes incomprehension, doubts or hesitation, even within the Government."

After the resignation of Urzúa, the Mexican peso lost value against the dollar, although the fall was moderated with the rapid appointment of his replacement.

The day closed with a depreciation of the peso against the dollar of 1.38% in the interbank market, and went on to sell from 18.9 to 19.16 pesos per dollar.

Meanwhile, the Mexican Stock Exchange suffered a fall of 1.77%.

"It was a surprise and the markets do not like surprises," Gabriela Siller, Director of Economic-Financial Analysis at Banco Base, told Efe, predicting that credit agencies will punish Mexico for these movements.

Siller said Urzúa's letter is "a severe blow of criticism" to Lopez Obrador and shows that economic decisions are being made and that programs are approved "without having studies of costs and benefits."

In addition, he stressed that this resignation increases the economic and political "uncertainty" of the country because "85 years ago it did not last so short" a Mexican finance minister.

Urzúa was a strong advocate of "financial stability" in the government and the architect of austerity policies to finance the large infrastructure works that López Obrador wants to build in the south of the country.

When making forecasts, it was more prudent than the president, who has promised a 4% annual GDP growth at the end of his term in 2024.

"He was the most important official in terms of the message of stability for the markets," Khemvirg Puente, coordinator of the Center for Political Studies of the National Autonomous University of Mexico (UNAM), told EFE. for the Government and for Mexico. "

In addition, it was part of the "moderate" sector within the Government, led by the Secretary of the Interior, Olga Sanchez Cordero, in front of a more "radical" sector, led by López Obrador himself and senior officials of the Presidency.

Puente pointed out that, despite the fact that Herrera has the same convictions as Urzúa, there is a danger that "the most radical and least prepared sectors" will gain weight in the Executive.

BBVA, the main bank in Mexico, ratified its support for Arturo Herrera at the head of the Treasury and trusted that it will apply "sound and prudent fiscal discipline measures."

The Mexican business community expressed its concern through the Business Coordinating Council (CCE) and the Employers' Confederation of the Mexican Republic (Coparmex), which demanded that the problems exposed by Urzúa be resolved in his resignation letter.

The resignation of Urzúa is the most relevant in the six months of López Obrador's government, although it has not been the first.

In mid-June, and in the midst of the migration crisis, the head of the National Immigration Institute (Inami), Tonatiuh Guillén, resigned his post.

In June, the head of the Executive Commission for Victim Assistance (CEAV) of Mexico, Jaime Rochín, and that of the Energy Regulatory Commission (CRE), Guillermo García Alcocer, also resigned.

In May, the head of the Mexican Institute of Social Security (IMSS), Germán Martínez, and the Secretary of Environment and Natural Resources (Semarnat), Josefa González-Blanco, did the same thing.

. (tagsToTranslate) Waiver (t) Treasury (t) interdict (t) economic (t) Mexico

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