Mexican President Andrés Manuel López Obrador unexpectedly proposed that Deputy Finance Minister Victoria Rodríguez replace his original nominee for central bank governor, the former Finance Minister Arturo · Herrera.
The Mexican president nominated a woman as the governor of the central bank for the first time after unexpectedly abandoning his previous candidate. This disrupted the market, depressed the peso currency and caused uncertainty in monetary policy.
To the surprise of government officials on Wednesday, President Andrés Manuel Lopez Obrador proposed that Deputy Treasury Secretary Victoria Rodriguez succeeded his original central bank governor candidate and former candidate. Arturo Herrera, Minister of Finance.
Analysts said that Mexico’s restructuring to fight the highest inflation in 20 years has confused investors and prompted a sell-off of Mexican assets. At one point, the peso’s exchange rate against the US dollar fell by more than 2%, but some losses were later recovered.
According to data from IHS Markit, as five-year credit default swaps rose by 5 basis points to 112 basis points, the insurance cost of Mexico’s sovereign debt risk rose slightly to the highest level since March. The spread with U.S. Treasury bonds also rose to 365 basis points, the largest level since early October.
Rodríguez has been promoted to the ranks of successive governments in Mexico City since Lopez Obrador was mayor, and has kept a low profile in the Ministry of Finance. Some analysts expressed concern that she was not independent enough.
“I think this is why the peso fell from the bed. People are worried that this is his (Lopez Obrador) roundabout way of intervening in the central bank,” said Omotunde Lawal, director of debt for emerging markets at the Bank of Barings.
Lopez Obrador did not specify what changed his mind. He said Rodriguez will act independently and his government respects the autonomy of the bank.
When asked if Herrera did something wrong, Lopez Obrador said no, he was committed to including women, and Rodríguez was the best “in light of this situation” choose.
Lopez Obrador has in the past clashed with the central bank over the use of surpluses generated by foreign exchange fluctuations, but he also refuted the idea that his change of mind might weaken the Mexican currency.
“The government and the Ministry of Finance did not interfere with the Bank of Mexico’s decision, not once,” he said. “And we won’t do it.”
Nevertheless, the performance of the peso on Wednesday was significantly lower than that of other major currencies in Latin America.
Rodriguez will succeed the outgoing governor Alejandro Diaz de Leon (Alejandro Diaz de Leon), whose term will end at the end of 2021. Her nomination must be approved by the Mexican Senate, and given the government’s majority vote, this should be a formal procedure.
Lopez Obrador selected Herrera as the head of the bank in June. Although some rumors began to circulate that his name might be withdrawn, a senior When the legislator announced the change of the plan, officials were surprised by the news.
Rodriguez is preparing to join the bank at a challenging time. Data shows that inflation grew faster than expected in early November, reaching 7.05%, the highest level since April 2001.