World

Trump Win Would Hit Mexico Like a ‘Hurricane,’ Says Central Bank Head

Mexico's central bank governor Agustin Carstens speaking at an event in Mexico City, Mexico May 31, 2016. Credit: Reuters/Henry Romero/File

Mexico’s central bank governor Agustin Carstens speaking at an event in Mexico City, Mexico May 31, 2016. Credit: Reuters/Henry Romero/File

Mexico City: Mexico‘s central bank chief said on Friday that a Donald Trump victory in the US presidential election would hit Mexico like a hurricane.

Speaking on local radio, Agustin Carstens also said that “it was a reality” that there was a correlation between the country’s weakening currency and the Trump campaign. The Mexican peso has fallen about 11% against the dollar this year.

Asked whether the Republican nominee’s victory would be like a category five storm for the country, Carstens said “yes, it would be a stronger hurricane” than if Democratic nominee Hillary Clinton wins.

Carstens added that the scenario for Mexico was better with a Clinton win in the November 8 presidential election.

In a radio interview later on Friday, Carstens said that he does not expect the government’s currency commission to hold any extraordinary meetings prior to the US election.

The commission’s next scheduled meeting is November 17.

Mexico‘s central bank on Thursday hiked its benchmark interest rate by 50 basis points, to counter the peso’s decline, concerned it could fan inflation.

In Friday morning trade, the peso was 0.96% stronger, at 19.335 per dollar.

Trump has vowed he would build a wall on the border with Mexico and renegotiate or scrap the North American Free Trade Agreement if he is elected. US is Mexico‘s main trading partner and Wall Street analysts say concern over any potential trade restrictions have weighed on the peso.

The peso has become a vehicle used to cover against the risks linked to the November election, Carstens said.

Queried about Trump, he added that “one candidate’s” unconventional ideas posed a risk to the economies of Mexico, US and the world.

When asked what would happen if Clinton wins, Carstens said that if the factors that cause volatility reduce, the peso could strengthen.

“Without a doubt, I agree with the possibility that the peso could appreciate under certain scenarios in the future,” he said.

Carstens added that the bank had to use its judgement in using tools such as the sale of dollar-denominated foreign reserves.

Trump‘s visit to Mexico City in August to meet President Enrique Pena Nieto sparked outrage across the country and led to the resignation of Luis Videgaray as finance minister.

(Reuters)