Mexico's Central Bank Chief Hopeful for IMF Job

| May. 28, 2011 |

Published by Minyanville

Mexican central bank chief Agustin Carstens officially received his country’s support for his bid to run for managing director of the International Monetary Fund on Monday, a step forward for the emerging markets of the world keen to take the position from the hands of Europe, which has held the seat since the organization’s inception after World War Two.

Brazil, Russia, India, China and South Africa all called this week for the position not to automatically be given to a European. However, they're all pulling in different directions rather than backing one non-European candidate.

“While Europe has closed ranks around its candidate, the emerging markets are united only around the concept of making a bid for the post of IMF managing director rather than a particular candidate. This will weaken their position, so they need to act soon and decisively to agree upon a viable candidate they can all support," Cornell University economist Eswar Prasad told the Wall Street Journal. Carstens is keen for emerging markets to unite around a common candidate.

Most likely to take on the position is French finance minister Christine Lagarde. Even Brazil, who signed the statement asking for a rethink on an automatic European candidate, appears to be backing her.

Carstens, however, is showing optimism. “I have heard expressions of sympathy, but most countries in a responsible way are waiting to see who the candidates are,” he told Bloomberg. The one thing that could bolster Carstens’ position is support from the United States, which already has a delicate relationship with Mexico. The candidate claims to have had “some conversations” with officials north of the border.

“I don't see why, for the fund ... to contribute to solving the crisis in Europe, a European has to be the managing director,” Carstens added, supporting the view of many that an emerging market should take the helm.

“Right now the crisis is in Europe, but we don't know where the next crisis will be. We need a managing director who is there for all the membership and who has the capacity to contribute to the resolution of issues in all parts.”

The 52-year-old was deputy managing director of the IMF from 2003 to 2006 before he began serving as Mexican finance minister.

Domestically, Carstens said this week that he expects Mexico’s GDP to grow as much as 5% in 2011, even after the first quarter’s slower than expected growth of 4.6%. With the US economy strengthening, and domestic consumption and private investment recovering, Mexico could look forward to the central bank forecast, Carstens told Bloomberg.

In other domestic news, finance minister Ernesto Cordero has announced that he would like to run for president in next year’s elections. The National Action Party member has received much support from his party, thanks to being “part of a new generation.”

Drug violence is likely to be the big issue over the next year as more than 40,000 have died since president Felipe Calderón took over in December 2006.

One of the foci of this violence has been the border town of Ciudad Juárez in Chihuahua state. Calderón was keen to highlight a drop in murder rate, from bout 11 a day in October to four.

“I know that Ciudad Juárez suffers still,” Calderon said in a speech. “I know there is sorrow, pain, anguish for many families. But I know there is a different and better future for Juarez if we keep working together.”

However, more mass graves are being discovered. Northern desert city Durango saw the seventh discovery last week.

The country is still looking to attract tourism, especially with a number of US government travel warnings to the country. Calderón has touted 2011 as the “year of tourism” with the Mexican Tourism Board spending millions of dollars on advertising. According to the Tourism Board, however, nearly half of all available rooms in 70 of the country’s major resorts have been vacant this year.

Potential visitors, it seems, are not differentiating between those areas such as Juárez and Durango plagued by violence and safe resorts such as Cancun. “What's disconcerting is that these advisories are painting an entire country with a broad brush,” Terry Denton, president of a Texas branch of the Travel Leaders agency, told the Seattle Times.

"It just reinforces the unfortunate impression that all of Mexico is not a safe destination.”

Mexico’s second-largest airline has filed to publicly list its shares, just a month after AeroMexico—its larger competitors—did the same. Neither the total size of the deal or the number of shares on offer has been announced.