Mexico’s Treasury Secretary Resigns, Cites Interference

Jul 9, 2019
2:59 PM

Carlos Urzúa (via Twitter)

By MARK STEVENSON, Associated Press

MEXICO CITY (AP) — Mexico’s treasury secretary resigned Tuesday, complaining of the appointment of unqualified officials by “influential people in the current administration who have clear conflicts of interest.”

Carlos Urzúa, a longtime ally of President Andrés Manuel López Obrador, did not specify who he meant. But his resignation letter suggested that ideology might be involved.

Urzúa wrote that economic policy should be “free of extremism, whether that be right or left,” but said “that belief was not reflected” by the administration. He also accused López Obrador of making policy decisions “without sufficient justification.”

Urzúa’s resignation came at a sensitive time for López Obrador, who faces threats of tariffs from the United States and downgrades from ratings agencies.

López Obrador said he had accepted Urzúa’s resignation, but did not respond to the accusations. He acknowledged Urzúa had not agreed with some decisions, and noted “We cannot continue with the same strategies. You cannot put new wine in old bottles.”

The president appointed Assistant Treasury Secretary Arturo Herrera to replace Urzúa and said his job would be “to create wealth, in order to distribute wealth.”

Herrera served as chief of finances for López Obrador when he was Mexico City mayor in the early 2000s, and has also worked for the World Bank.

López Obrador has sought to appease the business community, but has also drawn criticism for pushing ahead on costly pet projects and canceling a partly built Mexico City airport.

The president has gone on an unceasing austerity drive to reduce spending on government salaries, but has also created a series of new direct-grant cash payment programs for youth scholarships and training programs, and expanded payments for the elderly.

He has also embarked on ambitious infrastructure projects like the Maya Train, to connect tourist resorts and pre-Hispanic archaeological sites on the Yucatan Peninsula.

Alfredo Coutino, Latin America director at Moody’s Analytics, said one of the big fears was that López Obrador’s social programs and building projects could hurt the government’s drive to avoid budget deficits.

“He has promoted the main infrastructure projects. The question is does he have the money to finance those projects or not,” Coutino said. “Where’s the money coming from for all these social programs? I think that one of the pressures that Carlos Urzúa had was that we don’t have money to finance all these social programs.”

Coutino said Urzúa had provided some confidence for investors, and his resignation roiled markets, with stocks dropping almost 1 percent and the peso falling to about 19.50 to $1.

“It’s a big shock,” he said. “The main question is this going to be just a transitory negative event, or is it going to the beginning of pieces falling apart.”

López Obrador has said that savings from the government’s spending cuts and an anti-corruption campaign would pay for the projects, along with some private financing.

The president has sought to improve the financial footing of the debt-ridden state-owned Pemex oil company, and reduce the amount of money Pemex loses through fuel theft from illegal taps drilled into pipelines. But the president is also saddling the company with new refinery projects that experts say make little sense.

Last month, Fitch Ratings downgraded Mexico’s long-term foreign currency and local currency issuer default ratings, citing Pemex’s continued deterioration and the country’s continued weak economic outlook. It said actions taken so far by the government to prop up Pemex were not sufficient to stop the company’s decline.

Moody’s lowered the country’s economic outlook to negative from stable in June. And on Tuesday, Moody’s reduced its forecast for the economy’s growth to 1.2% for the year, down from 2% the previous year.