Then on June 12, International Monetary Fund managing director Horst Köhler seemed to confirm it: The respected Guillermo Ortiz would be nominated for a second term as chief of the Banco de México.
An unexpected source, Köhler was simply passing along news that he’d heard at a breakfast hosted by President Vicente Fox for international luminaries in town to commemorate Mexico’s retiring the last of its Brady bonds (see story, page 50). Fox disclosed that he intended to propose that the Senate confirm Ortiz for six more years. Told of Fox’s statement, Ortiz said he would accept.
Markets welcomed the news. As central bank head, Ortiz, 54, has proved to be a pragmatic economist. He has driven down inflation -- Mexico should reach its 2003 goal of roughly 3 percent -- built the bank’s reserves to a record $53 billion and established credibility for monetary policy. And he has modernized the bank, improving transparency with the regular release of statistics. “He has done a good job and has become the central bank governor in emerging markets,” says Alfredo Thorne, head of Latin American economic and policy research for JP Morgan Chase in Mexico City.
Reappointment would “make Ortiz a formidable central banker with great institutional strength,” says Rogelio Ramírez de la O, president of consulting firm Ecanal. Ortiz’s second term would span the 2006 presidential election. “Markets now know that in that [presidential] transition a variable is resolved.”
Ortiz, who has a Ph.D. in economics from Stanford University, was a Finance Ministry undersecretary from 1988'94, overseeing bank privatization. Named Finance minister following Mexico’s 1994 devaluation of the peso, Ortiz served on the government committee set up to rescue big banks by buying their bad-loan portfolios. In January 1998 he became central bank head.
Analysts expect the Senate to approve Ortiz, whose current term expires in December, without much difficulty. Still, his role in the $90 billion bank bailout provoked controversy and could arouse opposition. Fox’s ruling Partido Acción Nacional (PAN), which was out of power at the time of the bank rescue, fought it and later passed a law prohibiting Ortiz from sitting on the board of the bank bailout agency. And in 1999 PAN politicians charged that the government had assumed bank credits illegally and demanded that Ortiz be tried before Congress.
In what some see as a preemptive defense, the Banco de México has sued four leading banks to obtain full details of the loan portfolios they sold to the government. The suit “is an intent to legitimate Ortiz’s reelection as the head of the Banco de México,” contends Mario di Constanza, chief economic adviser to opposition legislators in the Partido de la Revolución Democrática.
Even if Ortiz wins speedy approval, the bank bailout dispute could hamper him in doing his job. This “is the issue that blocks political arrangements for agreeing on structural reforms,” says Ramírez de la O.
Nevertheless, Ortiz should have a strong mandate to damp inflation, maintain a strong peso and push for economic convergence with key trading partners Canada and the U.S. Another priority: stimulating growth.
