The Wall Street Journal
The Mexican peso fell almost 2% Tuesday after Finance Minister Carlos Urzúa announced he was quitting his job. The shock waves roiling the financial markets were due as much to the contents of Mr. Urzúa’s resignation letter as its suddenness.
Deputy Finance Minister Arturo Herrera immediately agreed to replace Mr. Urzúa and markets calmed. But business confidence, which was already shaky, has been further damaged. It is not likely to be repaired as long as Mexican President Andrés Manuel López Obrador-a k a AMLO-continues to centralize power and flout the rule of law.
AMLO has been on probation with investors since he was elected a year ago. The peso has held up because speculators are buying it to take advantage of the interest-rate spread over the dollar. But real money began running away last fall, when President-elect López Obrador announced he would cancel Mexico’s new international airport even though it was nearly 40% completed. Mr. Urzúa’s resignation letter suggests that behind the scenes there is even more reason to panic.
An orthodox economist trained at the University of Wisconsin, Mr. Urzúa wrote that he had many differences “in economic matters” with the president. Some of them were due to decisions taken by the administration without the necessary empirical backing, he explained. “Economic policy should be based in evidence” and “free of all extremism, be it from the right or the left.”
He also alleged the “imposition of officials” who have no “knowledge of the public treasury.” This is “motivated,” Mr. Urzúa warned, “by persons of influence inside the government with a clear conflict of interest.” Ouch.
In an interview published Saturday in Mexico’s Proceso magazine, Mr. Urzúa said he was referring mainly to Alfonso Romo, Mr. López Obrador’s chief of staff. I wrote about Mr. Romo’s murky reputation in the Monterrey business community in February 2018, when he was backing AMLO for president. Mr. Urzúa told Proceso he didn’t understand why AMLO had put a guy with Mr. Romo’s conservative views in his government. But what really seemed to irk the former minister was the power Mr. Romo had to name the heads of the tax authority and two important government-owned development banks.
Mr. Urzúa told Proceso that he did not trust Mr. Romo, who has access to confidential government information while maintaining close relationships with financial-market participants. It’s a good point. Mexico’s state-owned banks play a large role in the financial markets, and for most of the 20th century their mismanagement nearly always coincided with a Mexican financial crisis.
Mr. Urzúa says he’s a “social democrat,” ideologically aligned with the president, who he said is no Marxist. Mexicans are not so sure. On July 1 the Mexican newspaper Diario de Morelos reported that the small city of Cuautla in the state of Morelos has announced that it will host a delegation of Cuban medics in September. The news set off alarm bells in Mexico because “doctors” exported by the Castro regime to countries in the region-like Venezuela and Brazil-have earned a reputation as political organizers.
The Mexican government denounced speculation that AMLO is paving the way for greater Cuban influence in the country. But the health ministry has posted on its website its intention to “strengthen the institutional relationship” it has with Cuba.
This could be part of what Mr. López Obrador calls a radical “fourth transformation” of Mexico. Whatever AMLO’s agenda, Mr. Urzúa did not pass muster as a first lieutenant, despite his strong ideological commitment to leftwing causes like ending income inequality. There was too much pragmatism in his economics. After he stepped down, AMLO branded him a sympathizer of the economic liberalization of the past 36 years.
This is the mother of all insults from the president, earned largely, it seems, because the leftist Mr. Urzúa questioned AMLO’s cronies and spending priorities and argued that contracts need to be honored. Mr. Urzúa told Proceso he is particularly worried about the arbitration Mexico has launched with a Mexico-U.S.-Canada natural-gas pipeline consortium to supply one-third of Mexico’s needs. The López Obrador government wants to force the renegotiation of the contracts. Mr. Urzúa objected on the grounds that the legal battle would damage national development and could jeopardize passage of the new U.S.-Mexico-Canada Agreement.
Mr. Urzúa has stopped short of articulating what pushed him to resign last week. But he pulls no punches about the risks Mexico runs if AMLO is permitted to continue treating the country as his own fiefdom.
By: Mary Anastasia O’Grady
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