Alejandro Díaz de León has appeared this Wednesday for the last time as governor of the Bank of Mexico. In his farewell after four years at the helm, he has defended the mandate of the institution in controlling inflation, on the rise in recent months. At the same time, the official has highlighted the strength of the Mexican financial system, its downward delinquency and high liquidity, although he has warned of the slow recovery of credit to companies and households given the uncertainty created by the pandemic.

Serious and measured, the farewell to Díaz de León has been a message of tranquility for the markets, after the doubts created around the respect of the institution’s autonomy by the Executive. “I am sure it will continue [la Junta de Gobierno] working for the Bank to fulfill its mandate ”, declared the official, proposed by former President Enrique Peña Nieto. “I have no doubt about his professionalism and technical ability,” Deputy Governor Galia Borja said of her colleague. “Their contribution has been very decisive for the Bank to fulfill its mandate,” Deputy Governor Gerardo Esquivel has reiterated in turn, who has on occasion criticized the way in which the change was carried out.

Díaz de León leaves the Bank of Mexico after navigating the hardest part of the pandemic. The financial stability report presented this Monday highlights the “solidity” of the system. In general, the delinquencies of homes and companies have been reducing after a rebound caused by the economic crisis, and the liquidity levels of the banks “are comfortably higher than the regulatory minimums.” Furthermore, Mexico’s sovereign debt rating is better than those of other large economies in the region, such as Brazil or Colombia.

On the other hand, there are signs that the country’s recovery has slowed down in recent months. The Bank of Mexico cut its growth forecasts for this year last week, from 6.2% to 5.4%. In this Monday’s report, the institution points to the stagnation of financing. “The granting of credit has not shown a recovery in line with that observed in economic activity, reflecting caution from both the applicants and the offerors,” says the report.

The initiative for constitutional reform in energy matters promoted by the Government threatens to strain financial markets, by proposing the cancellation of current contracts between private power plants and companies. Although Díaz de León has indicated that it has yet to be discussed and approved in Congress, he has quietly mentioned the risks. “It is important to distinguish what is an initiative from what is an element already signed,” he said. “Many of these projects [energéticos] they are widely financed by the financial systems as a whole, both commercial and development banks ”.

The governor’s departure has been shrouded in controversy. It was announced in the summer by President Andrés Manuel López Obrador, more than six months before the end of the term, an anticipation that created uncertainty. The president said that he would be “an economist with a social dimension, very in favor of moral economy” and proposed, first, the former Secretary of the Treasury Arturo Herrera. However, surprisingly, he withdrew that proposal in November and put Victoria Rodríguez Ceja, a little-known Treasury official, in her place.

The announcement breaks with the tradition of renewing the incumbent governor since Banco de México became an autonomous institution in 1994. Díaz de León’s predecessor, Agustín Carstens, was renewed in office after the first six years and left. in 2017 to go to the Bank for International Settlements. Guillermo Ortiz Martínez was also ratified and held the chair from 1998 to 2009. The first governor Miguel Mancera served less than four years (1994-1997), but he had already been the Bank’s general director before he became autonomous.

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