Arturo Herrera rejects reform of Banxico Law

MEXICO CITY

The Mexican Secretary of the Treasury, Arturo Herrera, rejected on Wednesday a controversial reform project to the central bank law that would endanger the autonomy of the entity by forcing it to buy currencies that commercial banks cannot enter the financial system.

Deputies postpone changes to Banxico Law until 2021

Defenders of the bill, approved by the Senate in early December, argued that it would help Mexicans with limited access to the financial system, such as migrant families and hotel workers, who are paid in dollars.

However, the central bank condemned the initiative, saying that it was an affront to its autonomy, could force it to absorb money from drug cartels and would put its reputation before international financial authorities at risk.

Herrera said that while the law may have been well intentioned, it was not going to help solve the problem, causing one of the government’s strongest setbacks to the initiative.

The only thing that this proposal was going to do is transfer the problem that these commercial banks had to the central bank, because the central bank would have had the same problem: how to export these dollars, ”Herrera told Reuters in an interview at its offices.

Senate reverses Banxico Law and accepts changes

Upon approval in the Senate, the Chamber of Deputies decided to postpone and review the bill in the coming weeks.

Herrera said that 99.3% of remittances arrived in Mexico through formal non-cash financial channels.

If it is a problem of 0.7%, it is a problem that we can solve through operational mechanisms (…) and it does not necessarily involve making a change to the Bank of Mexico law, ”the official considered.

PANDEMIC

Mexico’s economy is expected to contract by almost 9% this year due to the impact of the coronavirus pandemic.

Herrera predicted that the economy would grow 4.6% next year, but noted that it could be even more, depending on the progress of the vaccination program against COVID-19.

Vaccination and prudent management of public finances should give investors confidence that Mexico deserves its investment grade credit rating, he added.

In the year when there has been the greatest stress for public finances around the world, we were able to maintain ourselves at the levels of net indebtedness that Congress had approved us in October last year, when I did not know that there was going to be COVID-19 ”, he pointed.

Senate parliamentary groups give details on Banxico Law

Mexico could return to normal levels of economic activity in the coming months, driven by new public-private investment projects in infrastructure and energy, he added.

Herrera said that the Ministry of Finance will also continue to work with the state oil company Pemex, whose heavy debt is affecting Mexico’s sovereign rating.

Finance Undersecretary Gabriel Yorio said this month that Pemex’s tax burden could be further reduced. The company has received government support in various ways, but in April its bonds lost their investment grade rating.

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