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Calderon taps new Mexico central bank chief

President Felipe Calderon names Finance Minister Agustin Carstens, who is seen as more willing to work with Mexico's leader on economic changes, to the key post. Critics say the timing is wrong.

December 10, 2009|By Tracy Wilkinson
  • Mexico's President Felipe Calderon, left, nominated a close political ally, Finance Minister Agustin Carstens, center, to replace the well-respected head of the central bank.
Mexico's President Felipe Calderon, left, nominated a close political… (Alfredo Guerrero / Associated…)

Reporting from Mexico City — In the middle of his country's worst economic crisis in a generation, Mexican President Felipe Calderon on Wednesday nominated a close political ally, Finance Minister Agustin Carstens, to replace the well- respected head of the central bank.

Carstens, a University of Chicago-trained economist, has serious creds in the financial world too. But he is also seen as someone willing to be more collaborative with the president than the fiercely independent outgoing Bank of Mexico director.

The Cabinet shuffle comes as Calderon plans to make economic policy his primary focus next year, government sources say. The first half of his six-year term has been dominated by a bloody war against drug cartels.

The coming year is also probably the last opportunity for the Calderon government to push through politically charged economic changes before the country's attention turns to the 2012 presidential election, analysts say.

Carstens, if approved by the Mexican Senate, will replace Guillermo Ortiz, who has held the bank governorship for 12 years. Ortiz is well respected in financial circles here and abroad and has openly clashed with Calderon over economic policy, including the raising of interest rates and ways to check government spending.

Ortiz became finance minister at the height of Mexico's peso crisis in the mid-1990s and was widely credited with slashing inflation and helping to rescue the economy. At the bank, he shunned political interference and reassured investors.

Carstens, who did a stint at the International Monetary Fund, is also respected, and international financial analysts did not express dismay over the changes.

Among Calderon's political opposition and some analysts here, however, questions were raised about whether Carstens would maintain the Bank of Mexico's autonomy. Critics also said that, given the dire straits of the Mexican economy, it might not be the ideal time to change the man at the helm of sensitive finance policy.

"The president is taking a very high risk by fixing something that wasn't broken," Sen. Francisco Arroyo of the opposition Institutional Revolutionary Party said Wednesday. "The country is not in the position to take such delicate risks."

Mexico suffered repercussions from the global economic crisis more than most of Latin America because of its close financial ties with the United States. Top income-earners lost ground, including manufactured goods and petroleum, along with tourism, which suffered a double whammy with the advent of last spring's flu epidemic. Remittances from Mexicans living in the U.S. also have dropped sharply.

Joblessness is high, Mexico's international credit rating dropped, and the Social Development Ministry announced this week that an additional 6.6 million Mexicans will fall below the poverty line next year.

"He'd make a magnificent governor at the Bank of Mexico, but not right now," commentator Sergio Sarmiento noted in the Reforma newspaper.

"The independence [of the institution] is called into question when the president puts his finance minister in the job. It is bad policy for the president to put an official close to him in a position that is supposed to be independent of him."

Speaking in Washington this week, Carstens said worries about continued autonomy at the bank were unfounded because policy decisions are taken by a five-member board, and he as governor would have just one vote.

On Wednesday, after his nomination, Carstens pledged to uphold the bank's fundamental task of fighting inflation and promoting the stability of the Mexican peso.

"That does not mean that opportunities of coordination between the Bank of Mexico and the federal government cannot be more effectively exploited," he said.

Carstens' nomination received swift approval from an array of business and industrial organizations.

"This could be the right moment to give the Bank of Mexico more authority to work on national economic growth, not just monetary stability," Miguel Maron, head of one of several chambers of industry, told the official Notimex news agency.

Calderon named Ernesto Cordero, another close ally who is relatively unknown and has served as head of the Social Development Ministry, to replace Carstens as finance minister.

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