Mexican central-bank chief: The Donald Trump ‘horror movie’ is about to start

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Mexico’s Central Bank Governor Agustin Carstens in Mexico City, December 7, 2015.
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Thomson Reuters

With Donald Trump just a month away from assuming the Oval Office, Agustin Carstens, Mexico’s normally staid central-bank chief, has issued a dire warning to his country.

The US president-elect is a danger of such magnitude that he could become a “horror film for Mexico,” Carstens told a group of executives in Guadalajara, Mexico’s second-largest city.

“Right now we have seen the short films,” he said, according to Spanish newspaper El País, “but beginning on January 20 the film is going to run.”

Carstens, known for his steady hand as bank chief, has sounded the alarm about Trump before, and his latest warning comes just a few weeks after he announced he would step down in July 2017.

Weeks prior to Trump’s election win, the central-bank chief suggested that the president-elect could be like a category-five storm for Mexico – “it would be a stronger hurricane,” he said at the end of September.

Trump has excoriated US companies that move jobs and facilities to Mexico, threatened to throw a 35% tariff on Mexican imports (80% of which come to the US), and repeatedly inveighed against NAFTA, a free-trade agreement binding the countries of North America.

The US president-elect has also railed against Mexican immigrants in the US, promising to build a border wall and suggesting seizing remittances – which provide more foreign income for Mexico than oil – in order to pay for it.

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The Mexican peso fell precipitously in the wake of Trump’s election victory on November 8, recovering only slightly since.
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Markets Insider

All of this has weighed on the Mexican economy. The peso, which has been declining for some time but surged and plummeted with the ebb and flow of the US presidential campaign, tumbled in the aftermath of Trump’s victory.

Mexico’s markets remained unsteady in the days after Trump’s win, with regulators rolling out daily checks on banks and brokerages. Tequila producer Jose Cuervo put its IPO on hold because of volatility in the wake of the election. Many have predicted a fall in GDP, and some have warned of recession.

More recently, with oil production slumping, inter-annual inflation at its highest level in almost two years, and debt surpassing 50% of GDP, Mexico’s central bank elected to raise rates 50 basis points, to 5.75% – an “aggressive” move in “an unofficial battle to try to support the currency,” said Andrew Stanners, investment manager at Aberdeen Asset Management.

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Mexican President Enrique Peña Nieto, left, with Donald Trump.
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AP

Mexican President Enrique Peña Nieto, an unpopular leader who saw his approval ratings fall to new lows after Trump’s election, has urged unity in the face of northern danger.

“Our history reminds us that when we have not been united, the country has suffered disasters that leave painful scares,” Peña Nieto said.

Others have argued that it’s time for Mexico to look for partners elsewhere.

“Mexico is waking up to realize that we cannot keep being economically dependent on the USA. This is the lesson: diversify,” Viridiana Rios, a global fellow at the Washington, DC-based Wilson Center and a former adviser to the Mexican finance ministry, told Business Insider after the election.

“And we will. It will take some time, and will be painful in the short term, but will happen.”