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Spending Cuts First Test for Mexico's New Finance Minister

  • Reuters

Mexico's Finance Minister Jose Antonio Meade (R) hands over the 2017 budget to the Chamber of Deputies chairman Javier Bolanos in Mexico City, Mexico, Sept. 8, 2016.

Mexico's Finance Minister Jose Antonio Meade (R) hands over the 2017 budget to the Chamber of Deputies chairman Javier Bolanos in Mexico City, Mexico, Sept. 8, 2016.

Second-time finance minister Jose Antonio Meade is Mexico's consummate insider, serving under both main political parties and widely seen as a potential presidential candidate, but he now faces the unpopular task of slashing spending.

President Enrique Pena Nieto named Meade as finance minister on Wednesday, replacing Luis Videgaray, the president's closest aide, after he reportedly oversaw a visit to Mexico by Donald Trump that angered Mexicans stung by the U.S. Republican presidential hopeful's namecalling and his stance on immigration.

The son of prominent members of the ruling Institutional Revolutionary Party (PRI), Meade has held top jobs both under Pena Nieto and his predecessor Felipe Calderon of the center-right National Action Party (PAN), who named the Yale-educated economist first as energy minister, then in 2011 as finance minister.

Soft spoken and diplomatic, Meade is widely liked in Mexican political circles. He survived the 2012 change of government to become foreign minister under Pena Nieto, and most recently has run the Social Development Ministry, a high-profile role that is often seen as a launch pad for a presidential run.

Several members of Pena Nieto's cabinet are quietly positioning themselves for a run at the presidency in 2018, and Meade's new role contains pitfalls for anybody with ambitions for higher office.

However, his chances could be bolstered by a revival on his watch of Mexico's economy, which contracted in the second quarter for the first time in three years.

Meade's first task will be to present the 2017 budget, expected to lay out deep spending cuts aimed at restoring investor confidence after ratings agency Standard & Poor's last month said it could downgrade the country's credit rating following a marked increase in debt.

"The government will have to tighten its belt, not the families or companies of Mexico," said Pena Nieto with Meade standing beside him as he announced the changes, emphasizing that fiscal consolidation was the government's top economic priority.

Pena Nieto vowed there would be no new taxes or tax hikes in Meade's drive to contain debt growth, and said he should give priority to social projects and investments.

As one of the Finance Ministry's technocratic old guard who is seen as close to central bank Governor Agustin Carstens and free of the corruption that has tainted the image of the PRI, the appointment of Meade was welcomed by economists.

Adam Collins of Capital Economics said Meade was well known to investors and likely to be seen as a "safe pair of hands."

Videgaray was highly respected for his record of pushing major economic reform through Mexico's divided Congress. Meade's friendships with legislators on both sides of the aisle will also likely help him navigate the fractious politics of the country's economics.

"He has the academic background and the experience politically and technically, to be as good as Videgaray as minister of finance but on top of that we do think that he is more investor friendly," said Gabriel Casillas, an economist at Banorte.