President Calderon Shuffles Economic Team

Carstens and Cordero: Their Duty is to Reactivate the Mexican Economy

In 2009 Mexico suffered the repercussions from the global economic crisis worse than most emerging economies. As a result of its close financial ties with the United States, Mexico’s top national income-earners decreased including manufactured goods and oil exports, along with tourism.

The latter suffered seriously with the advent of last spring’s flu AH1N1 epidemic. Remittances from Mexicans living in the U.S. have also dropped significantly.

With the objective of accelerating the Mexican economic recovery President Calderon recently reconfigured his economic team. The Cabinet shuffle came as Calderon plans to make economic policy his primary focus next year, according to government sources. This year is probably also the last opportunity for the Calderon government to push through politically charged economic changes and reforms.

Agustin Carstens, who assisted President Calderon as Secretary of the Ministry of the Treasure since the beginning of this administration in 2006, was released from this responsibility.

Dr. Carstens was then proposed by President Calderon to be the next Governor for the Bank of Mexico, a government independent institution.

Carstens is a University of Chicago- trained economist. He is recognized as having serious credentials in the financial world. He has been approved by the Mexican Senate to replace Guillermo Ortiz, who has held the bank governorship for 12 years, and who, reportedly, has had multiple policy confrontations with the Calderon administration.

Guillermo Ortiz is well-respected in financial circles in Mexico and worldwide. Ortiz became Finance Minister at the height of Mexico’s crisis in the mid-1990’s and was widely credited with slashing inflation and helping to rescue the economy.

Dr. Carstens did a stint at the International Monetary Fund and is also highly respected. International financial analysts are not expressing a major dismay over the changes taking place. Although there are some weary voices about the continuity of the counterbalance the Bank of Mexico provides against federal initiatives in Mexico’s economic policies.

Meanwhile, as mentioned, the President of Mexico announced that Ernesto Cordero will replace Agustin Carstens as Secretary of the Ministry of the Treasury.

The LA Times posted this on December 10th: “In the middle of one of his country’s worst economic crisis Mexican President Felipe Calderon nominated a close political ally, Minister of the Treasure Agustin Carstens, to replace the well-respected head of the central bank”.

Some of the media have criticized the nomination of Carstens. He is seen as someone willing to be more collaborative with the President than the traditionally more independent now former Governor of the Bank of Mexico. Among Calderon’s political opposition, some are raising questions about whether Carstens would be able to maintain the Bank of Mexico’s autonomy.

In this way, Carstens declared that the worries about the continued autonomy at the Bank of Mexico are unfounded because policy decisions are taken by a five-member board and he, as Governor, would only have one vote.

Martin Moreno, an economic analyst made this comment at Excelsior: “In the case of Agustin Carstens, his nomination is a reward for his actions at the Ministry of the Treasury. Even though his nomination leaves many doubts because of his previous declaration on ~being at the service of President Calderon~. This is why, “where is the autonomy of the Bank of Mexico?”… is being asked. For Yuriria Sierra, who is a Mexican Political Analyst, the designation of Carstens comes with the main purpose of defending the Mexican Peso in 2010.

Businessman Carlos Slim, one of the world’s top five billionaires, made clear his support for Carstens”.The changes look good for me,” said Slim, “and I’m satisfied that the monetary and economic policies can go in the same way. Carstens has all the credentials necessary to occupy the top position at the Bank of Mexico”.

Just after his nomination, Agustin Carstens pledged to uphold the bank’s fundamental duty of advocating defense of inflation and promoting the stability of the Mexican peso”.That does not mean that opportunities of coordination between the Bank of Mexico and the Federal Government cannot be more effectively exploited,” he explained.

President Calderon named Ernesto Cordero, a close ally and friend of the President, to replace Carstens as Secretary of the Ministry of the Treasury. Cordero is an economist. He graduated from the Instituto Tecnologico Autonomo de Mexico (ITAM) where he obtained a Bachelor in Actuary.

He also has a Masters Degree in Economics from the University of Pennsylvania. While Cordero was pursuing a Ph.D. in Economics in 1999, he received the Edwin Mansfield Award for his research.

Prior to his designation as Secretary of the Ministry of the Treasury he served as Under Secretary for the Ministry from December 2006 to January 2008. Then he was named by President Calderon as Secretary of the Social Development Ministry.

Jorge Fernandez Menendez is one of the most recognized political editorialists of Mexico. He named Ernesto Cordero as the ~Secretary of the Recovery~. “The crisis,” he said, “influenced the designation of Cordero. He is a professional with granted capacity and he has influence with the rest of the Cabinet as well as in the heart of Calderon”.

Fernandez Menendez also posted that Cordero has experience in this ambit”. He has good relations,” Menendez observed, “with the entrepreneurial sector so his political act will be fundamental for the goodwill of this vital sector”.

Yuriria Sierra, a Political Analyst, expressed that Ernesto Cordero comes with the duty to renovate one of the most injured secretariats of all time in Mexico”.The former Secretary of the Treasury,” Sierra commented, “viewed the economic recession as a little case of the flu which as time passed was transformed into pneumonia. Cordero needs to recover the strength of the Treasury of Mexico”.

Jose Yuste wrote that Ernesto Cordero represents the first Secretary of the Treasury so close to the President: “Cordero will work with a team that shares objectives and methods with President Calderon,” Yuste said, “he is not a stranger to this Secretariat. He played an important role as Sub-Secretariat where he moved President Calderon’s first two year budgets forward”.

“My commitment,” stated Secretary Cordero, “…is to work to consolidate economic reactivation through the effective management of the finances in a way that is prudent, responsible and disciplined”.

“All Mexicans,” Carstens said, “need to join in the effort toward pushing resumption of accelerated economic growth. This has to be done by multiplying the job creation effort while focusing on the demolition of poverty”.

Time will tell.