Mexico’s President Names Economist as Finance Chief

Mexican President Ernesto Zedillo on Monday further strengthened his grip on the levers of Mexican power, naming a close ally as finance secretary and giving the veteran economist one precise instruction: to maintain the disciplined policies that produced growth last year of more than 7%.

Economic analysts welcomed Zedillo’s designation of Foreign Secretary Jose Angel Gurria Trevino to the post of finance secretary. Gurria, who studied public finance at Leeds University in Britain, and at USC and Harvard in the U.S., has spent half of his nearly 30 years of public service in various finance ministry posts and is well-regarded in international financial circles.

Zedillo named the previous finance secretary, Guillermo Ortiz, as governor of the Bank of Mexico, the equivalent of the U.S. Federal Reserve. Ortiz was widely credited with engineering Mexico’s recovery from the December 1994 peso crisis.

Thus, as Zedillo begins the second half of his six-year term, he is moving firmly to fill key economic positions with like-minded technocrats and political allies who will carry forward his brand of market reforms and fiscal discipline, which have allowed for the recovery.

The challenge ahead, as Zedillo himself noted in making the appointment, is to avoid the economic crisis that has traditionally accompanied the end of each six-year presidential term.

“The task I now give to the new secretary of finance is very precise and consists of continuing to apply, with unbreakable discipline, the economy policy that is allowing this country to achieve economic growth in a framework of increasing financial and price stability,” Zedillo said.

“This government proposes to achieve not only a good economic conclusion to the sexenio [six-year-term], but also to leave behind very solid bases for the future development of the country,” he added.

Gurria, 47, said he will work “to consolidate the already very clear economic recovery and create elements of certainty.” He said he will seek to build a broad national consensus on economic policy that would permit continued growth “while generating more employment opportunities at better pay, as Mexican society is demanding, in a context of fiscal and monetary discipline.”

Mexico’s growth rate for 1997 is projected at 7.3% to 7.4%. It was achieved in a climate of falling inflation--about 15% annually, down from 28% in 1996 and 52% in 1995. The fierce 1995 recession sharply curtailed buying power and caused widespread job losses, and the recovery has brought a welcome relief--including the creation of more than 1 million jobs in 1997 and record levels of investment--up 22% for the first nine months of 1997, Ortiz reported in his final news conference as finance minister on Dec. 17.

Abel Beltran-del-Rio, a Mexican economist who heads the CIEMEX-WEFA econometric consulting firm in Pennsylvania, said Gurria “knows the international language of business and has the right academic credentials. His contacts outside Mexico will be very useful in carrying out his duties.”

Beltran-del-Rio said that when Zedillo took office on Dec. 1, 1994, he was poised to return Mexico to the sustained growth levels it had enjoyed in the 1960s, but instead he was confronted with the crash. “Zedillo was very unsure and shaken by the devaluation and the deep recession,” Beltran-del-Rio said. “By early 1997, he was able to bring back the economy to a good speed and create employment. That gave him enormous self-assurance and showed him he could build on the reforms of the past.

“So now he wants to be sure he can leave his mark, and for this he needs new names,” Beltran-del-Rio added. “Zedillo and Ortiz and Gurria all share the same vision. They want to modernize the economic and political system, and make Mexico one of the big jaguars of this continent.”

Javier Maldonado, chief Latin American economist for the Bank of Montreal, noted that Gurria’s international experience dates back to the renegotiation of Mexico’s foreign debt in the early 1980s.

“He is very capable, and he is one of the closest colleagues of the president,” Maldonado said. “Ortiz was one of his closest colleagues also. Now it seems Zedillo has total control not only of the economic side of the country, but also the political side,” he added. The latter part of his comment alluded to Zedillo’s appointment Saturday of a new interior secretary, Francisco Labastida Ochoa, who was brought in to reach a solution to the conflict in the southern state of Chiapas.

“Now Zedillo has a very solid Cabinet he can work with and reinforce the stability during the second half of his presidency,” Maldonado said. “In the last three or four presidential terms, things have fallen apart at the end. I think Gurria has the weight to persuade the markets that the country is pursuing a long-term strategy and economic program, and has the ability to stay on course for several years.”

The challenges for 1998 include the country’s trade balance and its current account--with some concerns being raised that the small trade deficit could grow, according to a survey of analysts appearing Monday in the Mexico City daily Reforma.

A similar survey in El Financiero, a business daily, reports that economists are concerned that the peso may become overvalued, always a worry toward the end of a presidential term, and that bank credit remains scarce, starving the economy of funds to continue growing.

The El Financiero survey found, nevertheless, that 55% of the analysts felt the climate for business would improve in the first half of 1998, that 38% expected no change, and that only 7% believed the climate will worsen.