Monday , July 02, 2018 - 11:21 AM
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International markets aren’t familiar with Carlos Urzua, the man who will lead Mexico’s finance ministry come December. The career academic’s lack of global chops is a concern for some investors, who would have preferred to see a financial heavyweight help steer the country’s economy after leftist Andres Manuel Lopez Obrador won the presidency on Sunday.
But Urzua isn’t a rookie either. The PhD in economics from the University of Wisconsin managed the finances of Mexico City -- the country’s largest and wealthiest -- from 2000 to 2003 when Lopez Obrador was mayor. He reined in expenditures then, and the increase in the city’s level of indebtedness in real terms during his boss’s term was 3.3 percent, compared with the previous administration’s 19 percent, according to data from the Mexico City government.
Urzua himself was quick to tell investors on Monday that he intended to remain fiscally disciplined, to respect the autonomy of the country’s central bank and its floating exchange rate regime.
Not everybody was convinced. “The debate about their fiscal policy in Mexico City is largely irrelevant,” said Alonso Cervera, chief Latin America economist at Credit Suisse Group AG. “It was the federal government that set the indebtedness limits to the city. The mayor and his team had no say on this.”
Urzua will have to reconcile his fiscal discipline pledge with Lopez Obrador’s campaign promises to boost social programs for youth and the elderly. His team says Mexico could raise the 0.7 percent of GDP needed for those special programs by cutting graft and slashing salaries and benefits of Mexico’s highest officials. Citigroup’s Mexico unit forecasts that along with other promises, such as not raising gasoline prices in real terms for three years, will swell Mexico’s deficit to 4 percent of gross domestic product -- the widest in decades.
While Urzua left the Mexico City administration halfway through its term and has worked in academia ever since, including at Princeton and Georgetown, he’ll have a team with broader financial experience. Arturo Herrera, a World Bank executive, and Harvard-educated Gerardo Esquivel are expected to take leadership roles within the Finance Ministry, he said. Lopez Obrador and his cabinet don’t take office until Dec. 1st and need to pass next year’s budget by mid-December.
“Carlos Urzua is a respected academic and a fairly traditional economist, but he does not necessarily carry the weight of more well-known Mexican economists in terms of his ability to move markets,” said Christopher Wilson of the Woodrow Wilson International Center for Scholars in DC.
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