Sunday, June 23, 2024

President says replacing governor won’t mean change in bank’s economic policy

Three days after he announced that he will replace the current central bank governor with an economist who supports a “moral economy,” President López Obrador asserted Monday that the change in leadership won’t result in a significant change to the bank’s economic policy.

“We’re going to put forward a good economist with experience in the management of the economy and finances — a serious and responsible person who will know how to run the Bank of México so that macroeconomic stability is maintained,” he told reporters at his regular news conference.

The appointment of an economist to replace current Governor Alejandro Díaz de León will not represent “a great turning point” in the bank’s direction, López Obrador said, adding that he was making the point so that everyone “can relax.”

Díaz de León’s four-year tenure concludes at the end of November.

“We’re going to comply with the commitment to respect the autonomy of the Bank of México,” López Obrador said. “We’ve done so until now, and we will continue doing so. We are not going to intervene in the policies of the Bank of México.”

Current Bank of Mexico Governor Alejandro Díaz de León.
Bank of México Governor Alejandro Díaz de León.

But the president also used the opportunity to take a shot at Díaz de León.

“I don’t agree with a lot of the technocrats from the previous government and the neoliberal period because they caused a lot of damage to the country,” López Obrador said, singling out Díaz for approving a 2015 loan when he was head of a government development bank so the state oil company Pemex could buy fertilizer plants at allegedly vastly inflated prices, a purchase that has been implicated in bribery investigations of Mexico’s former president, Enrique Peña Nieto.

“Due to that operation, we have a debt of US $1 billion. … If [Díaz de León] were a good, honest technocrat, he would have reviewed … the contract … and he would have realized that it was a contract contrary to the public interest, that it was a bad operation, and he wouldn’t have signed,” López Obrador said.

Díaz de León’s leadership of the central bank, however, is seen in a positive light by some opposition lawmakers.

Deputies Patricia Terrazas of the National Action Party, Fernando Galindo of the Institutional Revolutionary Party and Antonio Ortega of the Democratic Revolution Party agreed that the Bank of México governor has done a good job during his tenure, noting that he has maintained economic stability and kept inflation under control.

The president’s decision not to extend his term is indicative of his scant knowledge of economic matters, they told the newspaper El Universal.

Bank of Mexico Governor Alejandro Díaz de León, Mexican president Andres Manuel López Obrador
Bank of Mexico Governor Alejandro Díaz de León, center, has come into conflict with López Obrador over policy issues.

Speaking before López Obrador’s remarks on Monday, the three lawmakers made their view clear that it would be unacceptable for the president to appoint one of his staunch supporters to the governor’s position.

Terrazas and Ortega claimed that the decision not to renew Díaz de León’s term is revenge for the governor not throwing his support behind initiatives of the ruling Morena party — he didn’t support a Morena-sponsored reform in which the central bank would be required to buy other banks’ surplus foreign cash — and not turning over the bank’s foreign exchange surplus to the government.

“… The president wasn’t very happy with these decisions,” Terrazas said before noting that the rulings weren’t taken unilaterally by the central bank governor but by the bank’s board. “Today there is economic stability in the country; that’s thanks to the decisions of the Bank of México board, but mainly because of he who leads that group of experts.”

Galindo acknowledged that the president has the authority to appoint the governor and members of its board but questioned why he was replacing Díaz de León when he has achieved good results. The future governor and board members must be chosen for their economic knowledge and capacity to keep inflation low rather than for political purposes, he said.

“We mustn’t combine fiscal policy with monetary policy,” Galindo said, adding that the commitment to avoiding “an economic crisis from the monetary side” has been a pillar of the central bank in recent years.

“That’s why the profile [of the appointees] must be carefully considered. They mustn’t have a political profile; they must have a completely technical profile,” the deputy said.

Source: El Universal (sp) 

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