Carstens quits Mexican central bank to head BIS

Posted on December 1, 2016

Agustín Carstens, the widely respected governor of the Bank of Mexico, is quitting in July to head the Bank for International Settlements in a big blow to the country as it prepares for economic turbulence when Donald Trump becomes US president. 

Mr Carstens, 58, has been seen as an anchor of stability as the Mexican peso crumbles, inflation ticks higher and growth is expected to slow sharply next year when then-president Trump begins to flesh out his plans to renegotiate the North American Free Trade Agreement. 

Mr Carstens, who lost out to Christine Lagarde in the race to become IMF managing director in 2011, is chairman of the IMF’s International Monetary and Financial Committee, the fund’s policy advisory committee, and regarded as one of the global financial world’s heavyweights. 

The peso dived briefly to 20.8 to the dollar as the market digested the news of his departure. President Enrique Peña Nieto congratulated him on his move and hailed his “committed and outstanding work at the helm of the Bank of Mexico from January 1, 2010”. 

“He [Carstens] is looking at this change as an upgrade for sure. But from Mexico’s perspective, it is a clear loss given that he has always been seen as a strong anchor of Mexico’s macroeconomic policies,” said Alonso Cervera, chief Latin America economist at Credit Suisse. 

“This change comes at a very unfortunate time for Mexico, in light of the increased uncertainty globally and in Mexico resulting from the electoral results in the US on November 8,” he added. 

Raymundo Riva Palacio, a prominent columnist, tweeted: “The news that Agustín Carstens is resigning from Banxico adds bad omens to the last third of Peña Nieto’s government”. The president leaves office in 2018 and is struggling with historically low popularity levels. 

It was not clear who would step into Mr Carstens’ shoes at a difficult time, when the central bank is under pressure to keep a lid on inflation that could be stoked by the falling peso. The Mexican currency’s liquidity and 24-hour trading has made it a favourite proxy for traders to channel emerging market risk and has been in the line of fire since Mr Trump’s election victory, shedding 12 per cent since then and 20 per cent since April. 

Alejandro Werner, IMF western hemisphere director, was one name to crop up as a possible replacement for Mr Carstens. But the Bank of Mexico has a law requiring its governor to be Mexican-born or the child of Mexicans. Mr Werner, although raised in Mexico and a Mexican citizen, is the son of Argentines. 

Mr Carstens, who did his doctorate at the University of Chicago and has been a Mexican finance minister and deputy IMF managing director, will take the helm of the BIS from October 1, 2017, for a five-year term, and will be its first chief from an emerging market country. 

He had last year been confirmed for a second six-year term at the Bank of Mexico, due to serve until 2021. 

José Antonio Meade, finance minister, put a brave face on the departure, saying the nomination “reflects the confidence in his management”. 

He said the transition at the central bank, which has raised interest rates by 2 percentage points this year to try to keep a lid on inflation as the peso has crashed, would be orderly and that Mr Carstens “will be 100 per cent in charge for the coming months”. 

The news comes ahead of the central bank’s next monetary policy meeting on December 15. 

The move to the BIS had been rumoured for a while — Mr Carstens and the European Central Bank’s Benoît Cœuré were both seen to be in the running to succeed general manager Jaime Caruana, who has held the post since 2009. 

You must be logged in to post a comment Login