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Mexico’s finance minister quits in major blow to López Obrador’s government

July 9 at 5:04 PM

Mexico’s finance minister abruptly resigned on Tuesday, accusing the left-wing government of President Andrés Manuel López Obrador of making decisions that were not grounded in evidence and of naming officials who were ignorant of economics.

The resignation of Carlos Urzúa was one of the biggest blows yet to the seven-month-old government. López Obrador has sought to woo the business community by pledging a balanced budget and a stable peso, even as he has launched ambitious social programs to help youth and the poor.

But the peso immediately slid after Urzúa announced his resignation on Twitter, falling more than 2 percent, to about 19.3 pesos to the dollar. It later recovered some ground after López Obrador named a U.S.-educated technocrat, Arturo Herrera, as Urzúa’s replacement.

The resignation could increase uncertainty among investors, who are already wary of what they view as arbitrary decisions by López Obrador — such as canceling a $13 billion airport project outside Mexico City. The president had alleged that the half-finished project was rife with corruption.

Mexico this year became the No. 1 trading partner of the United States. But its economy — the 15th-largest in the world, in nominal terms — is in the doldrums, with growth of less than 2 percent expected this year.

“I think this is the first call of something very serious,” said Luis Rubio, chairman of the Center of Research for Development, a think tank based in Mexico City. He said Urzúa’s angrily worded resignation suggested that López Obrador was intransigent on economic decisions. 

“This is a really furious letter from somebody who has no history of being impulsive,” he said of Urzúa’s missive.

Alfredo Coutiño, the Latin America director at Moody’s Analytics, said the resignation represented a “shock” to the markets, as Urzúa was seen as “a guarantee of fiscal prudence.”

Despite the peso regaining ground after Herrera was named, Coutiño said, “the root of the problem is the friction between the political and economic areas” of the government. “Even though Herrera will ensure the continuity of fiscal discipline, the pressures that Mr. Urzúa mentioned in his resignation letter will continue to exist,” he said.

 López Obrador brushed off the resignation, saying in a video announcement: “We are committed to changing the economic policies that have been imposed on us for 36 years. As this is a transformation, sometimes people don’t understand that we can’t continue with the same strategies.”

The president took office in December after winning a landslide victory on the strength of promises to battle corruption and help the poor. López Obrador has remained popular, with approval ratings topping 60 percent. But his government has often appeared disorganized and lacking in experience. Some ministries have been riven by tensions between centrists and more traditional leftists. 

Urzúa, who has a PhD in economics from the University of Wisconsin at Madison, said in his resignation letter that he had had “many disagreements over economic policy” with the government. 

“Some of them were because this administration has taken public policy decisions without sufficient basis,” he wrote. “I am convinced that economic policy must be based on evidence, taking into account the effects it could have, and without any extremism, whether of the right or left.”

Urzúa added that the administration had installed officials “who don’t have any knowledge of public finance.” He blamed such appointments on “influential people in this government who have obvious conflicts of interest.” He did not identify any of the officials. 

Like Urzúa, Herrera, the new minister, had been employed in senior public finance roles in López Obrador’s administration when the leftist politician was mayor of Mexico City from 2000 to 2005. Herrera holds a doctorate in economics from New York University and worked at the World Bank on public-sector issues. Until Tuesday, he was a Finance Ministry undersecretary.

Herrera has won respect from markets for his work, including handling the debt of the Mexican oil giant Pemex, according to Coutiño. But investors were uncertain whether he would stand up to López Obrador, Coutiño added.

“If he doesn’t, then this could be a more permanent negative shock,” he said.

Urzúa is the highest-ranking official to quit López Obrador’s government. Other noteworthy departures include those of Germán Martínez, the head of the social security system, who left office protesting austerity measures he called “inhumane,” and Tonatiuh Guillen, the head of Mexico’s migration institute. Guillen resigned last month after López Obrador agreed to a crackdown on unauthorized migration at the behest of President Trump.  

Gabriela Martínez contributed to this report. 

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