Mexico’s Finance Minister Leaves Amid Trump Visit Backlash

Updated on
  • Videgaray oversaw tax increases, energy industry opening
  • Departure follows Trump’s visit, weak economic growth

How Will Videgaray's Resignation Impact Mexico's Economy?

Mexico Finance Minister Luis Videgaray resigned on Wednesday after a drop in the president’s popularity as public backlash mounted over Donald Trump’s visit to the country last week.

Jose Antonio Meade, a former finance minister who spent the past year as social development minister, replaces Videgaray. Meade said he’ll present to Congress on Thursday an "extraordinarily responsible" budget proposal for 2017 that includes the first primary surplus in eight years. Videgaray, one of the president’s closest allies in the past 10 years, pushed through a controversial tax increase in 2013 and championed the opening of the nation’s oil industry after 75 years of state monopoly.

Thursday’s budget proposal will show Mexico to be a "place of certainty and responsible conduct" at a time of turbulence and volatility in global markets, Meade told reporters in a choreographed handoff at the National Palace standing alongside his predecessor. Videgaray has preserved "a stable economy, with healthy public finances and responsible macroeconomic management," Meade said.

In announcing the change earlier in the day, President Enrique 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. Analysts have seen him as a potential candidate to follow in his footsteps in the national election of 2018, or to become the candidate for Pena Nieto’s Institutional Revolutionary Party in the State of Mexico governor’s election next year.

Videgaray won’t likely seek that governorship, according to two people with knowledge of the matter. Videgaray told staff during a meeting about his departure that he will probably return to the private sector after leaving his post, the people said, both of whom attended the meeting. If he does, Mexico’s law stipulates that he’d have to wait a year before he can work for an entity that he directly regulated, supervised or had links to while in office.

‘Been There’

“The markets have trusted Videgaray, he was the architect of the reforms and he’s in the middle of an important fiscal consolidation effort," said Gabriel Casillas, chief economist at Grupo Financiero Banorte SAB. "Meade has already been there, people know him, he’s very investor-friendly. You have someone who knows the ministry quite well and who will do a good job."

The Mexican peso extended its loss, falling 0.6 percent to 18.3797 per dollar at the close of trading on Wednesday.

Videgaray came under criticism in Mexico in recent days after daily newspaper Reforma and other national media reported he advised Pena Nieto to meet with Republican candidate Trump last week. He was also criticized by business leaders for the tax increase that took effect in 2014, stunting consumer demand just at a time when the economy was struggling to accelerate.

Meade, 47, served as finance minister for Pena Nieto’s predecessor, Felipe Calderon, of the rival National Action Party in the final year of his presidency, when the nation’s economy was recovering strongly from the 2009 recession. Meade was one of a few ministers who stayed on to become part of Pena Nieto’s government in December 2012, serving as Mexico’s foreign minister before heading the Social Development Ministry. He also previously served as energy minister and a deputy finance minister.

Pena Nieto, 50, has seen his public approval ratings plummet amid dissatisfaction with the government’s efforts against corruption, violence and growth below its own expectations that has dogged him since taking office in 2012. A poll by Reforma newspaper last month showed his popularity plunged to 23 percent, the lowest for any president in two decades.