Luis Videgaray was named as Mexico’s next finance minister a day before President-elect Enrique Pena Nieto takes power, making him the point man on budget and spending in the $1.2 trillion economy.
Outgoing Finance Minister Jose Antonio Meade, 43, becomes foreign minister and Ildefonso Guajardo, 55, a top economic adviser on the president-elect’s transition team, will be Pena Nieto’s economy minister, Miguel Osorio Chong, Pena Nieto’s interior minister, said at an event in Mexico City today. Emilio Lozoya Austin, the son of a former energy minister, will lead state-owned oil company Petroleos Mexicanos, and Pedro Joaquin Coldwell will head the Energy Ministry, Osorio Chong said.
Videgaray, 44, ran Pena Nieto’s campaign, helping return the Institutional Revolutionary Party to power after a 12-year hiatus from seven decades of uninterrupted rule. He also headed the new leader’s transition team and served as finance minister when Pena Nieto was governor of Mexico state, winning an upgrade in the region’s debt to investment grade. His most immediate challenges will be to overhaul the tax system and open the energy industry to more private investment.
“It’s absolutely a fantastic choice,” said Duncan Wood, director of the Mexico Institute at the Woodrow Wilson International Center for Scholars in Washington. “It’s recognition for all the hard work and it gives him a very powerful position in Mexico. I think markets are going to see that as a very positive step forward.”
One position Pena Nieto has yet to name is his ambassador to the U.S., Mexico’s top trade partner and its neighbor along a 2,000-mile border.
Pena Nieto’s proposals are similar to the economic bills his party helped block under outgoing President Felipe Calderon. To ensure their approval, Videgaray must now convince PRI lawmakers to break with decades-old taboos against stripping power from unions and raising taxes.
Mexico’s peso fell for the first time in three days, dropping 0.2 percent to 12.9667 per U.S. dollar. Yields on peso bonds due in 2024 fell seven basis points, or 0.07 percentage point, to 5.52 percent, according to data compiled by Bloomberg.
Guajardo takes over a ministry that under Bruno Ferrari, its outgoing head, helped lead Mexico’s push to join Trans- Pacific Partnership trade negotiations that include the U.S., Canada and eight other nations in the Americas and Asia. Mexico in June was invited to join the talks, whose next round is scheduled for Auckland, New Zealand in December.
Osorio Chong will lead an Interior Ministry that Pena Nieto wants to put in charge of security, by folding the Public Security Ministry into it, to streamline the nation’s fight against crime. Mexico’s drug war has cost more than 57,000 lives since Calderon sent the army to take on the cartels after taking office in December 2006, according to a count kept by Mexico City newspaper Milenio.
Pena Nieto, who takes office tomorrow, has pledged to increase tax collection and boost private investment in Pemex, as Petroleos Mexicanos is known, even as the oil workers’ union led by PRI stalwarts fought prior energy bills.
The new president will inherit an economy forecast to grow 3.8 percent this year, twice as fast as Brazil’s 1.5 percent and compared with 2.2 percent in the U.S., according to the median estimate of economists in a Bloomberg survey.
The International Monetary Fund in April projected Mexico’s government debt will equal 43 percent of gross domestic product next year, versus 110 percent for the U.S., 77 percent in Germany, 91 percent for the euro area and 77 percent overall for the Group of 20 nations.
Videgaray, a Massachusetts Institute of Technology graduate in economics who wrote his doctorate thesis on how oil price changes have “shocked” governments reliant on crude, got his start in politics when then-Mexico state Governor Pena Nieto appointed him finance minister in 2005. He had helped restructure the state’s debt a year earlier while working for the Mexico City-based investment bank Protego, headed by former PRI Finance Minister Pedro Aspe.
Videgaray has the experience and closeness to Pena Nieto to take on a similar role to the one current central bank Governor Agustin Carstens played previously as Calderon’s finance minister, promoting his economic agenda that included a pension overhaul, Wood said.
Videgaray helped Mexico’s most populous state lift its credit rating to investment grade as its debt fell by 46 percent in real terms over the past decade to 28.7 billion pesos ($2.2 billion), according to Aregional, a Mexico City-based public finance research organization.
Guajardo, an economist who got his doctorate from the University of Pennsylvania, previously served as a representative in Mexico’s lower house. He also worked in the Foreign Ministry, as a negotiator on the North American Free Trade Agreement with the U.S. and Canada that took effect in 1994, and as an economist at the International Monetary Fund.
To contact the reporters on this story: Jose Enrique Arrioja in Mexico City at firstname.lastname@example.org; Eric Martin in Mexico City at email@example.com; Nacha Cattan in Mexico City at firstname.lastname@example.org
To contact the editor responsible for this story: Joshua Goodman at email@example.com