By Dave Graham
MEXICO CITY (Reuters) -Mexican President Andres Manuel Lopez Obrador on Wednesday tapped his finance minister to run the central bank and picked a close ally to lead the finance ministry to help realize his vision of a fairer economy during the final half of his term.
Lopez Obrador said on Twitter that Finance Minister Arturo Herrera would take over from Bank of Mexico chief Alejandro Diaz de Leon, whose term concludes at the end of 2021.
To replace Herrera, Lopez Obrador chose economist Rogelio Ramirez de la O, who will be the third finance minister since the president took office in December 2018.
Ramirez faces a challenge reinvigorating the economy after two tough years for Lopez Obrador, whose efforts to strengthen state control of sectors like energy were sapping business investment even before the coronavirus pandemic.
Still, lifted by massive U.S. stimulus spending, the economy is expected to rebound strongly this year as the president approaches the halfway mark of his single six-year term.
In a video published in social media to flag the changes, Lopez Obrador vowed to boost social spending, while Ramirez said he would uphold budgetary discipline and prioritize Mexico’s poor.
“We’ll continue behaving responsibly, without getting the country into debt, without spending more than we take in, with honesty and austerity,” Lopez Obrador said.
Ramirez, educated at the National Autonomy University of Mexico and Cambridge University, is a longstanding adviser to Lopez Obrador and was his pick for finance minister when he first ran for the presidency in 2006, an election he narrowly lost.
Herrera said he would stand down around mid-July, and pledged to uphold the central bank’s independence. It has defended itself recently against congressional efforts to amend its functions and criticism from Lopez Obrador.
“It’s very clear what role I’ll be taking on if the Senate ratifies me, and the importance of defending the autonomy of the Bank of Mexico, and I think the president understands that,” Herrera said during an interview on Mexican radio.
Jorge Gordillo, an economist at CI Banco, said Herrera’s nomination was good news as he had an established track record.
“Herrera’s viewed as a technical person. He knows the markets; he’s respected,” he said. “But we don’t know how much Herrera will be the president’s man at the Bank of Mexico.”
Luis Gonzali, co-director at Franklin Templeton Investments in Mexico, said Herrera would probably show more independence in the bank than he had at the ministry. He noted that other Lopez Obrador nominees to Banxico’s board had not bowed to his will.
Diaz de Leon was appointed to head the central bank under the previous government. Lopez Obrador, who regularly excoriates his predecessor, made plain that he saw those ties as a problem, and vowed to pick a successor who supported “moral economics”.
Herrera, a former World Bank executive, took the job of finance minister in July 2019 when his predecessor quit after becoming frustrated by the drift of policy.
Under Lopez Obrador’s auspices, Herrera ran tight budgets as minister and managed to maintain a relatively strong tax take during a prolonged phase of weak economic growth.
Mexico’s economy slipped into a mild recession during Lopez Obrador’s first full year in office, and suffered a slump of 8.5% during 2020 when the pandemic took hold.
While trying to prop up the economy, Herrera has grappled with trying to help loss-making and heavily indebted state oil firm Petroleos Mexicanos (Pemex). Lopez Obrador has made reviving Pemex a top priority.
To improve the firm’s efficiency, Ramirez is known to be a proponent of simplifying the corporate structure of Pemex, which over time has been carved into several companies.
(Reporting by Dave Graham; Additional reporting by Sharay Angulo, Abraham Gonzalez Anthony Esposito and Frank Jack Daniel; Editing by David Gregorio)