Mexican president names finance minister to head central bank

López Obrador nominates long-term ally after frequent clashes with current governor
Bank of Mexico

Mexican president Andrés Manuel López Obrador nominated his finance minister and long-time ally Arturo Herrera Gutiérrez as the next central bank governor on June 9.  

López Obrador announced on May 21 that he would not renominate incumbent governor Alejandro Díaz de León, with whom he has clashed on several occasions. The president said he would look for “an economist with a social dimension, very much in favour of moral economics”.

If confirmed by Mexico’s senate, or upper house of parliament, Gutiérrez would start his term at the beginning of next year. Some observers expressed worries that Gutiérrez might not have the experience as a banker or regulator that Mexican law formally requires central bank governors to have.

AMLO, as the president is also known, named Rogelio Ramírez de la O to succeed Gutiérrez as finance minister. He is director of a consultancy, Ecanal.

Announcing the appointment, the president said he wanted to continue what he called his successful economic policies during the second part of his term. He said Mexico was recovering from the Covid-19 pandemic, had not devalued the peso and had not increased its debt load.

Under Mexican law, the president nominates a candidate for governor of the Bank of Mexico for a term of six years. The Senate must confirm this appointment. The new governor’s term begins on January 1 in the fourth year of the president’s own six-year term, which for López Obrador would be January 1, 2022.

Mexico’s economy shrank by 8.2% in 2020, according to the International Monetary Fund. López Obrador has followed a relatively austere economic policy, citing a need to avoid increasing public debt and dependence on the IMF. Mexico suffered serious debt crises in 1982 and 1994.

Banxico cut interest rates by 25 basis points, to 4%, in February 2021. It left rates unchanged in May.

The candidate

Gutiérrez became finance minister in July 2019, after AMLO’s first finance minister resigned over policy differences. He had formerly served as the deputy secretary for investment in the finance ministry in López Obrador’s government.

López Obrador first worked with Gutiérrez when the former was mayor of Mexico City. Gutiérrez served as director-general in the finance department from 2000 to 2004, and then as the city’s finance secretary from 2004 to 2006.

Prior to joining the López Obrador government, Gutiérrez worked at the World Bank, which he joined in 2010. He became practice manager of the Public Service and Performance Unit in 2011.

Gutiérrez attended El Colegio de Mexico and the Autonomous University of Mexico and undertook doctoral studies at New York University.

Some economists critical of López Obrador argue that Gutiérrez does not meet the legal requirements to hold the governorship. Guillermo Barba, editor of Top Money Report, says he lacks the requisite five years in a senior banking or regulator position.

Sergio Negrete Cárdenas, a professor at Mexico’s Iteso business school, agreed with this assessment. He noted that the past four governors have had at least 20 years of experience as a banker or regulator, and Gutiérrez has had none.

Díaz de León

Enrique Peña Nieto, president between 2012 and 2018, nominated Díaz de León to an eight-year term as deputy governor of the Bank of Mexico. Díaz de León assumed this office at the beginning of 2017.

In November 2017, Peña Nieto nominated Díaz de León to succeed Agustín Carstens, who resigned as governor to become managing director of the Bank for International Settlements. Díaz de León took office on December 1 of that year, to serve out the remainder of Carstens’ six-year term.

Díaz de León, who holds degrees from the Technological Institute of Mexico and Yale, worked at Banxico between 1991 and 2007, rising to director of economic studies. Between 2011 and 2015, he was head of the public credit unit at the finance ministry.

In March 2021, Central Banking named Díaz de León its “governor of the year”, citing his defence of the central bank’s independence. The journal also lauded Díaz de León’s move to increase the central bank’s greater transparency and implement a new instant-payments system.

A sometimes turbulent relationship

The current governor clashed several times with AMLO. Just before his announcement that he would not renominate Díaz de León, the president had complained that Banxico was not remitting any profits to the government for 2020.

In April 2020, the president had asked Banxico for an advance from these profits, which the central bank refused.

In August of the same year, López Obrador accused Díaz de León of involvement in a loan to the state oil company, Pemex. The loan was made by Bancomext in 2015 and paid for the overpriced acquisition of a fertiliser company.

Díaz de León worked for about a year at Bancomext before becoming deputy governor of Banxico, but said the loan predated his arrival at Bancomext.

The central bank also pushed back against a presidential proposal to require Banxico to buy up unrepatriated US dollar holdings in cash. The central bank warned this risked the stability of the reserves and involving Banxico in money laundering. As finance minister, Gutiérrez did publicly dissent from AMLO’s advocacy of the law and effectively agreed with the central bank’s criticisms.

Working with Gutiérrez’s finance ministry and private banks, Banxico presented a joint proposal to expand access to exchange facilities in February 2021.

López Obrador also accused the Banxico governor of being close to Jose Antonio Meade and Luis Videgaray, finance ministers under Peña Nieto. Peña Nieto belonged to the once-dominant Institutional Revolutionary Party (PRI), and Meade was the PRI’s 2018 candidate.

López Obrador began his career in the PRI, before joining the left-wing breakaway Democratic Revolutionary Party. He ran for president in 2006 and 2012 on its ticket, before forming his current party, Morena, which is also on the left.

Mexico held mid-term elections on June 6, in which the president’s coalition won multiple governorships, but saw its majority in parliament’s lower house shrink. Seats in the upper house, where the president’s coalition already has a majority, were not up for election.

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