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Surprisingly, the market collapsed, Mexican President Andres Manuel Lopez Obrador asked Victoria Rodriguez, the deputy finance minister, to replace the governor-general of the central bank, former finance minister Arturo Herrera.
The president of Mexico appointed a woman to run a central bank for the first time after the unexpected departure of his predecessor, which disrupted markets, lowered the peso currency and sparked financial uncertainty.
To the surprise of government officials on Wednesday, President Andres Manuel Lopez Obrador asked Victoria Rodriguez, the deputy finance minister, to replace the governor-general of the central bank, former finance minister Arturo Herrera.
The shock as Mexico struggles with inflation over the past 20 years has disrupted money laundering, resulting in Mexican goods being bought, researchers say. At one point, the peso exchange rate fell sharply by more than 2 percent against the dollar, although it later recovered some losses.
The cost of providing insurance on Mexican credit has risen sharply since March when the five-year mortgage exchange rate rose five points to 112 bps, according to IHS Markit data. The spread of U.S. Treasuries again hit 365 bps, the largest since the beginning of October.
Rodriguez, who has risen to succession in Mexico City since Lopez Obrador became mayor, has no track record in the finance ministry, and some experts have complained that he could not be independent.
“I think that’s why the peso is falling off the bed. People are worried that this is a way to get him (Lopez Obrador) to disrupt the central bank,” said Omotunde Lawal, head of the markets coming to corporate debt in Barings.
Lopez Obrador did not elaborate on what changed his mind. He said Rodriguez had acted freely, and that his government respected banking rights.
Asked if Herrera had done anything wrong, Lopez Obrador said no, he was committed to including women, and said Rodriguez was the best way “to get things right”.
Lopez Obrador, who had previously argued with the central bank over the use of money left over from foreign exchange transactions, also challenged the notion that his reforms could hurt Mexico’s currency.
“There has been no disruption by the government, and the finance ministry in the elections of the Bank of Mexico, not even once,” he said. “And we don’t.”
However, the peso did worse than any other major currency in Latin America on Wednesday.
Rodriguez is set to replace outgoing governor-elect Alejandro Diaz de Leon, whose term expires at the end of 2021. His appointment must be approved by the Mexican Senate, which must be approved by a majority of state officials.
Lopez Obrador in June appointed Herrera to head the bank, and despite some rumors circulating that his name could be removed, officials welcomed the incident on Tuesday when the attorney general announced a change in plans.
Rodriguez is ready to enter the bank at a critical juncture, with data showing that inflation has risen sharply than expected in early November to 7.05 percent, the highest since April 2001.
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