Traders Won’t Miss Mexico Minister Undone by Trump’s Visit

Updated on
  • Finance Minister Videgaray unexpectedly resigned yesterday
  • Local media reported he advised president to meet with Trump

To many bond investors, the departure of Finance Minister Luis Videgaray of Mexico was overdue.

Since Videgaray took office in December 2012, the country’s peso-denominated notes have lost 14.4 percent as public debt increases, its state-owned oil company reels and the economy sputters. That’s far worse than the average for emerging markets. The currency has also plummeted 30 percent against the dollar over that span.

Luis Videgaray
Luis Videgaray
Photographer: Brent Lewin/Bloomberg

While debt investors have praised Videgaray’s role as an architect of sweeping fiscal, energy and banking-industry overhauls, they’ve yet to reap the benefits of the reforms as slumping oil prices wreak havoc on Latin America’s second-biggest economy. While speculation had been circulating for several months that Videgaray may resign to seek public office, his sudden departure followed a drop in President Enrique Pena Nieto’s popularity as a public backlash mounted over Donald Trump’s visit last week. Jose Antonio Meade, a former finance minister who spent the past year as social development minister, replaces Videgaray.

“A shakeup was a long time coming,” said Claudio Robertson, who helps manage $4 billion at Investment Placement Group in San Diego. Meade “is the best politician we have in Mexico right now and if anybody was going to be put in such a critical situation, he would be the best choice.”

On Wednesday, Pena Nieto thanked Videgaray, 48, for his work and gave no reason for his departure. Videgaray, a former investment banker, has worked for Pena Nieto since the president first became a governor in the State of Mexico in 2005 and championed the opening of the nation’s oil industry after 75 years of state monopoly.

Videgaray came under criticism in Mexico in recent days after daily newspaper Reforma and other national media reported that he advised Pena Nieto to meet with Trump. The Republican candidate for president has labeled some Mexican immigrants “rapists” and vowed to build a wall to keep out immigrants and compel Mexico to pay for it.

On Thursday, Trump took to Twitter to praise Videgaray, calling him a “brilliant finance minister and wonderful man." He added that “With Luis, Mexico and the United States would have made wonderful deals together."

A poll by Reforma newspaper last month showed Pena Nieto’s popularity plunged to 23 percent, the lowest for any president in two decades. The peso on Thursday fell 1.3 percent to 18.6192 per dollar at 2:31 p.m. in New York.

Meade, 47, takes office at a time when pressure is increasing on the government to shore up its finances. Two ratings companies have already lowered their outlook on the country’s debt to negative in the past six months.

Given all the challenges Mexico is facing, the change in finance minister is welcome, said said Alejandro Urbina, who helps manage $180 million of assets at Chicago-based Silva Capital.

“Videgaray was a good finance minister; he led the country’s transition in an important moment,” he said. “Jose Antonio Meade seems to me a good option.”

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