Monday, October 2, 2006

 

Mexican Central Banker Ortiz Speaks His Mind

 

By Allan Wall

 

On a recent trip to Dallas, Guillermo Ortiz, governor of the Banco de Mexico, the Mexican equivalent of the Federal Reserve, spoke his mind, expressing some opinions definitely at variance with those of the Vicente Fox administration.

 

Ortiz, a Stanford-educated economist, began serving as cabinet secretary of Communications and Transport back on December 1st, 1994, the day the administration of President Ernesto Zedillo (1994-2000) began.  But after the disastrous peso crash during Zedillo’s first month in office, Ortiz was moved over to Hacienda (the Mexican Treasury Department) to clean up the mess.

And Guillermo Ortiz did a good job of it.

 

As finance minister, he prevented things from getting worse than they actually did, got Mexico back on sound financial footing, even made it possible for the bailout debt to be repaid to the United States.  There hasn’t been another similar peso crash since, for which those of us residing in Mexico are (or should be) grateful.

In 1998, Ortiz was named chairman of the Banco de Mexico, where he has remained to date, continuing his prudent financial policies.

 

Guillermo Ortiz recently visited Dallas.  Speaking with the editorial board of the Dallas Morning News, he predicted the Mexican economy would grow at 4.6 to 4.7 percent this year, up from 3 percent in 2005.  The central banker also called for more flexibility in the Mexican economy, and competition in telecommunications and energy.

And the subject of immigration came up.

 

Most Mexican officials, when discussing this topic, demand amnesty for illegal aliens, more visas, less border control, or something of that nature.  But Guillermo Ortiz probably surprised the reporters.  The Mexican central banker actually said that a stricter U.S. immigration policy could help Mexico!

Quoth Governor Ortiz:

 

“I think Mexico needs its people. It would be best to keep its people in Mexico, and it would give incentives for Mexico to create the jobs that are needed.”

The Banco de Mexico chief admitted his views ran counter to those of the emigration-promoting Fox administration.

 

Ortiz said that the tougher immigration stance under discussion in the U.S. Congress “would not be altogether bad. It would certainly be better over the long run.”

The incentive question is key here.  Mexican politicians (of all parties) utilize emigration as a substitute for real economic reform. Why take tough, controversial and potentially unpopular decisions for the good of the Mexican economy when it’s much easier to just export the people?

A tougher U.S. immigration policy would reduce that escape hatch and might force Mexican politicians to face reality.  Elected politicians in any country (including the U.S.) have trouble facing reality unless they are forced to do so.

 

What about the billions of dollars in remittances sent from Mexicans in the United States back to Mexico?   According to Ortiz, they function as a safety valve for Mexican families, but they aren’t a key lubricant of the Mexican economy.

This fits in with a recent analysis of Alfonso Sandoval, of the United Nations Population Fund.  According to Sandoval, remittances do not translate into real incentives for productive economic development in the receiving regions.

In the case of Mexico, the evidence indicates that Mexicans who receive remittances are more likely to want to emigrate than those who do not.  Remittances don’t solve the basic economic problems in Mexico — they postpone their resolution.

 

Not long after making the above quoted comments to journalists, Ortiz clarified his remarks, as people who say something unpopular often wind up doing.

Chairman Ortiz said, “It’s absurd that this be interpreted as if I am in favor of the United States restricting its immigration policy.”  Ortiz pointed out the obvious: “We have to be prepared for this developing situation of toughened [U.S.] immigration policy. I don’t make commentaries over U.S. politics.”

 

Nevertheless, Ortiz stuck to his guns on the principal point: “… we should give employment to our people, the best thing for the country [Mexico] is to retain our people, because they are talented, enterprising and hard-working.”

These comments of Banco de Mexico governor Guillermo Ortiz are certainly worthy of consideration.

Is President-elect Felipe Calderon listening?

 

——————————

Allan Wall, a MexiData.info columnist, recently returned from a tour of duty in Iraq.  He currently resides in Mexico, where he has lived since 1991. He can be reached via e-mail at allan39@prodigy.net.mx.