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Mexican peso drops after Finance Minster Urzua resigns

Key Points
  • "Disagreements over economic matter were plentiful," said Carlos Urzua in his resignation letter to President Andres Manuel Lopez Obrador.
  • "I am convinced that all economic policy should be realized base on evidence," Urzua added. "However, during my tenure these convictions were not echoed."
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Peso moves sharply lower as Mexican finance minister resigns

The Mexican peso dropped against the U.S. dollar on Tuesday after Mexico's finance minister, Carlos Urzua, stepped down from his post.

As of 4:05 p.m. ET, the peso traded down 1.1% at 19.13 per U.S. dollar. The peso also reached its lowest level in a month against the U.S. currency.

Mexican stocks also took a hit. The iShares MSCI Mexico ETF (EWW) dropped to close 3.1% lower on the day.

Urzua tweeted out an image of his resignation letter, which was addressed to Mexican President Andres Manuel Lopez Obrador (AMLO).

"Disagreements over economic matter were plentiful," said Urzua in the letter, according to a CNBC translation. Some of them were because "this administration has made public policy decision without sufficient foundation."

"I am convinced that all economic policy should be realized base on evidence," Urzua added. "However, during my tenure these convictions were not echoed."

He also criticized the appointment of officials who "did not have knowledge" of public finance policy.

Mexico's economic growth stalled in the first quarter, rising just 0.1% compared to the year-earlier period, according to FactSet data. Some of AMLO's economic policy moves, such as scrapping a $13 billion project to build a new airport in Mexico City, have drawn criticism from the country's business community.

"Uncertainty reigns across the country," said Coparmex, a business group in Mexico, last week. "One year after winning the elections and seven months after beginning his mandate, the strategies of President Andres Manuel Lopez Obrador on economic, security, immigration and infrastructure projects generate uncertainty and worry."

Urzua assumed the role of finance minister in December, when Lopez Obrador assumed the Mexican presidency. Prior to that, Urzua was an economics professor at the University of Wisconsin and ran Mexico City's finances in the early 2000s, when AMLO was its mayor.

Urzua, a preacher of fiscal discipline, helped lower Mexico City's debt growth rate to 3.3% at the turn of the century. Under the previous administration, the city's debt grew by 19%.

"The resignation hints at broader divisions building within government," said Edward Glossop, Latin America economist at Capital Economics, in a note. "Urzua's resignation suggests that there may still be some within government who favour looser fiscal policy. In short, while Amlo has so far kept investors onside, cracks might now start to be appearing."