Mexico’s New Cabinet Hailed as Business-Savvy

President-elect Vicente Fox got off to a good start Wednesday in pleasing the international financial community, as the former Coca-Cola executive announced his first batch of Cabinet appointments.

Fox, who takes office Dec. 1, followed the lead of lame-duck President Ernesto Zedillo in putting economic management in the hands of U.S.-trained experts committed to fiscal conservatism.

The star of the new team is Francisco Gil Diaz, 57, the finance minister. He won fame as the “Iron Taxman” when he was deputy treasury minister for revenue from 1988 to 1994. Gil overhauled the tax code and improved Mexico’s woeful tax collection by jailing deadbeat business executives and pop stars.

Gil went on to the Central Bank, then to the chief-executive job at Avantel, a telecommunications company 45% owned by Mississippi-based WorldCom Inc.

Gil, who earned his doctorate at the University of Chicago and was a student of famed monetarist Milton Friedman, is expected to pursue a tight fiscal policy. Analysts said he would be a forceful figure to lead Fox’s charge to raise tax collection from the still-measly 11% of gross domestic product.

Jorge Mariscal, head of Latin American investment strategies at Goldman Sachs in New York, said it was “extremely reassuring” that Gil would run the Finance Ministry while the Central Bank remains in the hands of Guillermo Ortiz, whose term carries over from the Zedillo administration.

“I would say that Mexico, with Gil in the Finance Ministry and Ortiz in the Central Bank, probably has the best policymaking duo you can find in the emerging markets,” Mariscal said.

Fox is the first new president in two decades to take office without an economic crisis in sight. Under Zedillo, Mexico dug its way out of a peso crisis and has thrived. The economy just posted its 19th consecutive quarter of growth; inflation is expected to be below 10% this year; and officials anticipate gross domestic product will surge by 7%.

“The appointment of Gil Diaz reflects Fox’s acknowledgment that familiarity is important to the markets, and markets should not be ignored,” investment firm Bear Stearns said in a report Wednesday.

Many analysts consider the peso devaluation that began in late 1994 partly a result of new officials’ lack of contact with the foreign investment community.

Gil’s advantages, however, go beyond his public experience. Analysts say he has a reputation for incorruptibility. That, they say, should give him the credibility to persuade Mexicans to pay their taxes.

George Grayson, a political scientist at William and Mary College in Williamsburg, Va., recalls an incident that emphasizes Gil’s strict emphasis on propriety. Grayson met Gil’s wife at a cocktail party several years ago. Feigning exasperation, she complained good-naturedly of her husband: “Paco won’t even let me buy centenario gold coins--with my own money!”

Gil, then deputy treasury minister, “was determined to appear cleaner than Caesar’s wife,” said Grayson. “He may also have feared that his spouse’s purchasing gold could have been misconstrued as a sign of a weakening peso.”

Gil said in a brief speech Wednesday that he would seek to lower Mexico’s high interest rates, cut government costs and raise tax revenue.

Analysts also gave high marks to other members of Fox’s economic team named Wednesday.

World Bank economist Luis Ernesto Derbez will head the newly named Economy Ministry, which will handle trade and promote small and mid-size businesses. He holds a doctorate in economics from Iowa State University and worked for 14 years in the World Bank, focusing on economic programs in Latin America and Africa.

The Energy Ministry, a key job in the world’s fifth-largest oil producer, was given to Ernesto Martens. He has received high marks from business analysts for heading Mexico’s airline monopoly and Monterrey-based glass company Vitro.

“I think this points to a more private-sector orientation,” Mariscal said.

Martens faces the politically delicate task of opening up Mexico’s government-run energy industries in order to satisfy the country’s growing need for power.

Pedro Cerisola, who participated in the privatization a decade ago of the Mexican telecommunications giant Telefonos de Mexico (Telmex), was tapped for the communications and transport ministry. Cerisola, who also has worked in the airline industry, managed Fox’s presidential campaign.

Also named Wednesday was Eduardo Sojo, a top aide to Fox when he governed Guanajuato state, as a coordinator of the economic Cabinet.