It's about time. Great news from Mexico. Just when we were about to throw in the towel on Vicente Fox, the incoming President, he surprised us by picking Francisco Gil Diaz, 57, as his treasury secretary. "Paco" Gil, as he is called, was one of the most important members of the Salinas administration, second in command at treasury when Pedro Aspe was in charge. He was also second in command at the Bank of Mexico when the peso was devalued in December 1994. He did everything he could to prevent it, but was overwhelmed by the new Zedillo cabinet, which wanted the peso devalued.
The New York Times today describes Gil as a onetime student of Milton Friedman at the University of Chicago. In the ten years I've known Paco, he has never mentioned Friedman, always preferring to be identified as a former student of Robert Mundell, who taught at Chicago at the same time.
We have been telling our global clients there was a small chance Gil would be chosen, but only in the last few days did Fox swing that way. In any event, with Gil at Treasury, we expect the Bolsa to once again be a good investment. He knows how to manage the peso and also understands the importance of supply-side tax cuts, especially on capital gains. Mexico has the potential of double-digit ANNUAL growth over the next decade and Fox has been promising 7%. It did not seem possible in the months since his election, as he talked only of raising taxes to balance the budget. With Paco Gil at Treasury, we would bet on rapid growth.