MEXICO CITY (Reuters) – Mexican Finance Minister Arturo Herrera on Wednesday criticized a controversial bill proposed by the country’s ruling party that would force the central bank to buy foreign cash commercial banks are unable to return to the financial system.
Proponents of the legislation, which was passed by the Senate earlier in December, argued it is needed to help Mexicans with poor access to the financial system, such as migrant families and hospitality sector workers, offload their dollars.
However, the central bank castigated the bill, saying it was an affront to its independence, could force it to absorb money from drug gangs, and risked tarnishing Mexico’s reputation with international financial authorities.
Herrera said while the law may have been well intentioned, it was not going to help fix the problem, providing some of the strongest pushback yet from the government on the initiative.
“This change would only transfer the problem commercial banks have to the central bank because the central bank would have the same problem: how to export dollars,” Herrera told Reuters in an interview in the finance ministry offices.
Lawmakers in the lower house of Congress have agreed to overhaul the bill in the coming weeks.
Herrera said 99.3% of remittances arrived in Mexico through formal financial channels, not cash.
“If it’s really a problem of 0.7%, then we can resolve it using other mechanisms … and not necessarily through making changes to the Bank of Mexico’s rules,” he said.
Mexico’s economy is forecast to contract by almost 9% this year because of the impact of the coronavirus pandemic.
Herrera forecast the economy would grow by 4.6% next year, but noted that it could still be more, depending on the rollout of a nascent COVID-19 inoculation program.
Vaccinations and prudent management of public finances should give investors confidence that Mexico deserved its investment grade credit rating, he added.
“In the year of greatest stress on public finances in the whole world, we’ve been able to stick to the net debt levels Congress approved in October last year when we didn’t even know about COVID-19,” Herrera said.
Mexico could return to normal levels of economic activity in the coming months, lifted by new public-private investment projects in infrastructure and energy, he added.
Herrera said the finance ministry will also continue to work with national oil company Petroleos Mexicanos (Pemex), whose heavy debts are weighing on Mexico’s sovereign rating.
Deputy Finance Minister Gabriel Yorio said this month Pemex’s tax burden could be cut further.
Pemex has received various forms of support, but in April its bonds lost their investment grade rating.
Herrera, who will chair the board of governors for the International Monetary Fund and the World Bank next year, said the pandemic showed the need to rethink development more broadly and the amount of support middle-income countries receive.
(Reporting by Stefanie Eschenbacher and Anthony Esposito; editing by Diane Craft, Dave Graham and Grant McCool)