Donald Trump’s campaign threats have made Mexicans fearful. His election sent the peso plummeting to an all-time low.
Last week, Mexico’s central bank pulled the trigger on a “contingency plan” to weather a Trump presidency. Agustin Carstens, head of the Bank of Mexico, is on high alert. It’s his job to protect his country if Trump acts on what he calls “hurricane” level anti-Mexico campaign promises. For now, he hopes that’s not going to happen.
“I hope we don’t get to the hurricane level,” Carstens told CNNMoney in an exclusive interview in Mexico City. “I understand there are some things that are said during the campaign and once the person is in power, different decisions have to be taken.”
Bank of Mexico, also known as Banxico, raised its key interest rate last week to ease the peso’s collapse. The central bank cited the U.S. election as the main reason behind its decision, saying the economic outlook for Mexico had already “deteriorated.”
Beyond the peso’s plunge, the greater concern is that foreign investors will pull their money from the country out of fear that Trump’s policies would make doing business in Mexico difficult.
Trump has already said that one of top priorities is renegotiating, or withdrawing from, NAFTA, the free trade deal between Mexico, Canada and the U.S. Trump also wants Mexico to pay for a wall along the border and he threatens to impose a 35% tariff on Mexico’s exports to America.
“In a way you can say it’s why we have been increasing interest rates,” Carstens said. But he’d like to wait and see before doing more. “It’s like when you are a doctor and the patients come, you want to give them the right doses…I think a gradual approach is appropriate,” he said.
Carstens has seen cash flee Mexico before. Educated at the University of Chicago, Carstens worked at Banxico in 1994 during Mexico’s financial crisis. The government devalued the peso, causing inflation to skyrocket and Mexicans suffered through a severe recession.