Category Archives: Economy

Top job at Central Bank as a consolation prize?

Columnist Sergio Sarmiento has put forward another reason for delaying until November picking a replacement for Carstens as Governor of Banco de México:  It will be a consolation prize for either Videgaray or Meade, if either of them is not chosen by President Peña Nieto to be the PRI’s candidate for 2018.   Continue reading

Videgaray outlines Mexico’s negotiating posture with U.S.

Foreign Minister Videgaray testimony in the Senate 2/28 included several red lines and must-haves.

U.S. immigration law and enforcement

  • A strictly U.S. domestic issue, and Mexico will not get involved in an internal U.S. debate, BUT:
  • Mexico will not accept any non-Mexican deportees.
  • Mexico will protect the human rights of Mexicans in the U.S., and pursue any violations in international forums
  • There needs to be continued cooperation and coordination on border security matters; threats and insults need to cease
  • No militarization of the border
  • Mexicans leaving the U.S. (both voluntarily and involuntarily) must keep their rights to Social Security earned
  • U.S. and Mexico need to cooperate on Central America


We will not negotiate the Free Trade Agreement from the defendant’s dock.  Any negotiation between the parties must start from the premise that this has been an agreement that has generated important benefits for all three parties.

  • Mexico will undertake the trade negotiations, “without pause, but without haste”
  • No tariffs or quotas.
  • Negotiation should include mechanisms to support rising wages for Mexican workers, so the “production model” isn’t based on cheap labor.

The Wall

  • Construction of the wall is a hostile act, and Mexico will not collaborate in any way; but it is a sovereign matter for the U.S.
  • Mexico will pursue any violation of international law in international forums.

U.S. Tax regime

  • Mexico must be prepared to change its own tax regime if changes to US tax law affect Mexican interests or the economic competitiveness.

Drug trafficking / cartels

  • U.S. must assume its responsibility to reduce demand, and stop the flow of guns and money.


  • No measures that restrict the flow of remittances or increase their cost.

Central Bank acts to strengthen peso

Banco de Mexico made two announcements on the 21st that gave the peso a huge boost. Bank chief Agustin Carstens said that he will stay at the bank until November, instead of leaving in July for the BIS.  Secondly, the bank announced a $20 billion exchange cover auction program starting in March that will enable banks to hedge FX risk up to 12 months.  Not everyone was reassured by the new program.  Financial columnist Samuel Garcia wrote that the government could use the program to keep the peso artificially strong, if more negative news were to occur:  “The fact is that the government has decided to meddle in the FX market, as it did in 1982 and 1994, with the consequences that we all know.”  The peso strengthened 3.6% during the week, and closed below Ps. 20 per dollar for the first time since just after the U.S. election.

Carstens to stay at Central Bank ’til November

Agustín Carstens announced that President Peña Nieto had asked him to postpone his departure as head of Banco de México from April until November, and that he had agreed.  Given the lack of a clear successor to head the Bank, the delay will provide some additional financial stability through the gubernatorial elections in June and the 2018 budget approval process in September-November.

Gasoline price hikes push President’s approval rating to new low

The January 1 gasoline price hikes have crushed whatever residual popularity the government had.  The latest Reforma poll showed Peña Nieto’s approval rating cut in half to a mere 12% in just one month and a corresponding increase in his disapproval rating.

Q: “Do you approve or disapprove of the way Enrique Peña Nieto is doing his work as President?”

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59% of those surveyed said the gasoline price hikes had affected them “a lot” and another 26% said “some.”  Three out of five said they held the President responsible for the state of the economy.

EPN goes ‘old school’ to deal with inflation surge, down business climate

The government staged an elaborate signing ceremony for a so-called “Agreement to Strengthen the Economy and Protect Family Finances” that includes a hodgepodge of measures or potential measures to contain price increases and stimulate demand.  President Peña Nieto presided, and the pacto was signed by Meade, Guajardo, and Labor Secretary Alfonso Navarrete,  for the government; the head of the peak union organization, the CTM;  and the head of the peak business organization, the CCE.  The EPN government has frequently resorted to these corporatist-style attempts to control events, that date to a Mexican political and economic system that has long-since disappeared.

Coparmex, the Mexican Business Owners Confederation, which is one of the main constituents of the CCE, refused to sign, saying it was given the final text only 2 hours before the event, and the pacto did not include concrete measures, clear goals, or ways to evaluate progress.  As a mark of the last-minute nature of the event, the governors were not invited, although they were in Mexico City for a separate meeting of the Governor’s Confederation (Conago).

2nd Weekend of protests–some violent — against gasoline price hikes

Protests continued around the country against the Jan. 1 gasoline price hikes last weekend.  A peaceful protest in Monterrey at the Governor’s Palace was taken over by anarchists and became violent, with stained glass windows smashed and fires set.  Police reportedly stood by and did nothing.  President Peña Nieto’s brief New Year’s televised message on the 5th was milquetoast.  The gasoline price hikes, he said,

Come from abroad.  The government will not receive one cent more in taxes from the increase.  To try to maintain an artificial price for gasoline would have required us to cut social programs, increase taxes or increase the country’s debt, putting at risk the stability of the entire economy.