LatinFinance - January/February 2017 - 4

NEWS
PEOPLE

Mexico's central bank is awaiting new leadership to steer the country's
monetary policy through uncertain times. By Aaron Weinman

Mexican wave
Markets are cautiously
waiting for news from
Mexico's central bank, after
Agustín Carstens resigned
as governor in December.
The announcement came just
weeks after Donald Trump's
victory in the US presidential
election sent Mexican markets
into a tailspin.
While the resignation does
not have negative implications
for governance, it came as
a shock to the markets. The
governor, who will depart
in July, is "one of the most
respected figures" in the
financial community, says one
Mexico City-based investment
banker. "His replacement has
big shoes to fill."
Carstens' successor is
expected to be another strong,
credible figure who can extend
Banxico's solid policymaking
record, analysts said. But the
appointee will have a tough job.
The position demands
credibility to maintain investor
confidence in Mexico, and
the ability to direct monetary
policy to withstand external
blows from future US policy,
says Guillermo Aboumrad, a
director of market strategies
at Mexican brokerage firm
Finamex.
The peso slumped 12%
against the dollar in the days
after the US election. Carstens
acted quickly, raising the
benchmark interest rate by
50 basis points in November
to 5.25%, followed by another
hike of the same size in

December. At 5.75%, Mexican
interest rates are at their
highest since 2009.
Mexico's finance ministry is
holding its growth estimates for
this year at between 2% to 3%,
but private sector economists
have already marked down
their expectations in response
to the US election. Itaú
Unibanco cut its 2016 GDP
forecast for the country to 2.1%,
from 2.6%, and predicts 1.8%
this year.
"The Trump shock is likely to
perpetuate uncertainty about
protectionism, particularly
harmful for investment in
Mexico's manufacturing,"
Mario Mesquita, Itaú Unibanco
chief economist, said in a
report. "A prolonged period of
uncertainty over trade relations
will likely keep the peso at weak
levels."

Shortlisting candidates
Mexico's former finance
minister Luis Videgaray is
believed to be in contention
for the job, two sources told
LatinFinance. Other names
mentioned in local media
include Alejandro Werner, a
former deputy finance minister
and Banxico's existing deputy
governor Manuel Ramos
Francia.
The peso stabilized after
the November sell-off, but the
outlook for the year ahead is
highly contingent on the course
of US policies, Alberto Ramos
an economist with Goldman
Sachs, says. Exchange rate

4 L ATINFINA NCE.COM - January/February 2017

ECM rank by volume, full year 2016
Morgan Stanley steps up
Rank

Advisor

1
2
3
4
5
6
7
8
9
10

Morgan Stanley
JPMorgan
Santander
BTG Pactual
BofA Merrill Lynch
Citi
Itaú
Bradesco
BCP
Credit Suisse
Total

Value ($m)

# Deals

1,471
1,377
1,152
748
745
723
664
561
511
484

7
4
10
11
7
7
7
5
3
4

10,345

37

Source: Dealogic

forecasts are around 19.5 pesos
to 20 pesos to the dollar.
"The real effective exchange
rate looks undervalued," he
says. "A prolonged period
of uncertainty over trade
relations can exert pressure on
the peso."
Carstens, 58, has been
governor since 2010 and his
term at Banxico was scheduled
to conclude in 2021. In October
he will take the top job at
the Bank for International
Settlements in Basel,
Switzerland.
His departure came amid
several others from Latin

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market moves, visit:
latinfinance.com

American finance officials.
In Colombia, Juan José
Echavarría starts a four-year
term as central bank governor
this month, replacing José
Darío Uribe at BanRep. Uribe
was LatinFinance's Central Bank
Governor of the Year in 2014.
In Peru, Carlos Blanco left
his job as head of public credit
in December, to join a private
sector fund focusing on local
SMEs. The finance ministry had
not named a replacement for
Blanco by mid-December.
Ecuador's finance minister
Fausto Herrera also stepped
down due to health issues. LF

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Table of Contents for the Digital Edition of LatinFinance - January/February 2017
