Banxico Law Reform

Banxico Law Reform

Introduction

The main objective of Banxico is to preserve the value of the national currency through the time, so that could benefit the economic wellness of the Mexicans.

It is important that the institution preserve its autonomy because is a risk to let other agents like the government influence over the monetary policy, could be tempted to use this power to finance public spending.

The international reserves are financial assets that the central bank invests abroad. Its main characteristic is liquidity; that is to say, the ease of use to quickly settle payment obligations outside our country. Its main objective is to contribute to price stability when there is a decrease in trade or capital flows in the balance of payments, due to macroeconomic and / or financial imbalances (internal or external).

Why this reform to the law was proposed?

The reforms seek to eliminate the elements that limit the healthy flow of foreign currency, since, currently, fewer pesos are reported for each dollar exchanged, compared to those that could be received if there were a more efficient and less restrictive banking system.

What would be the main effects that it would have if approved?

It can be interpreted as a vulnerability of their autonomy, on which reputation rests, and which is necessary for the achievement of the objective of stable inflation.

Who would be the main winners and losers of this reform?

The winner could be the government that wins control over Banxico, the losers may be the people that can be affected by a higher inflation.

Conclusion

I think there’s a risk of damage the relations with the investors and how its perceive the way México respect the autonomous institutions, also if this goes wrong at the end is the people that really pays the price, by decreasing its purchase power they get a word economic wealth.

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