U.S. Treasury Secretary Timothy Geithner (left) shakes hands with Mexican Central Bank Governor Agustín Carstens (right) at April's IMF/World Bank meetings in Washington D.C.
Latin America: Week in Review, Mexico

Mexico’s Carstens Meets With Geithner; Says Lagarde Appointment Could Be “Conflict of Interest”

June 14, 2011 By Staff

U.S. Treasury Secretary Timothy Geithner (left) shakes hands with Mexican Central Bank Governor Agustín Carstens (right).

Today in Latin America

Top Story — Mexico’s central bank head Agustín Carstens was in the United States Monday to meet with Treasury Secretary Timothy Geithner in an effort to gain Washington’s backing in his bid to chair the International Monetary Fund (IMF).

Carstens, who along with France’s Christine Lagarde is vying for the position vacated by Dominique Strauss-Kahn, said that Europe’s control over the IMF is outmoded and it needs a new perspective on how to handle government debt and other economic problems that Europe currently faces.

Mexico’s bank chief was, however, realistic about his chances of obtaining the position at the IMF. Carstens said that the combination of 65 years of European leadership and the strong feeling in Europe that the IMF needs a European in charge stack the cards against him.

“That makes it more difficult. I’m not fooling myself. It’s like starting a soccer game with a 5-0 score,” he said during remarks at the Peterson Institute for International Economics in Washington D.C.

The U.S. has so far been noncommittal in the IMF race, but with the country holding 16 percent of the voting shares on the Fund’s executive board and a large leadership position its decision carries a good deal of weight. After a private meeting with Carstens, Geithner did not comment on backing any of the candidates.

“The secretary thinks Governor Carstens has a strong mix of financial talent and political skills, making him an exceptionally capable candidate to head the IMF,” The Treasury Department said in a statement.

For its part, the U.S. seems to be split between its own support of better representation for emerging markets and its need to maintain a hold on its appointment of the No. 2 spot at the IMF and its selection of the head of the World Bank.

While Carstens admitted he needed to fight an uphill battle, he didn’t pull any punches during his talk in Washington. He said that the European dependence on the IMF to bail out several of its members could be a challenge to Lagarde’s ability to take a hard stance as the Fund’s leader.

“I also think there could be a conflict of interest,” he said, accoding to The Montreal Gazette. “We’d have a situation where the borrowers dominate a creditor institution. I think that’s an issue we should consider.”

Carstens, who assumed control of Mexico’s central bank (Banco de México) in January of 2010, bills himself as the champion of the emerging-markets nations and believes theses markets need to play a much larger role in setting the agenda of the IMF.

He earned a doctorate in economics from the University of Chicago before becoming Banco de México’s International Treasurer in 1989. He has spent most of his professional career at Mexico’s central bank, but was also a deputy managing director at the IMF for three years before becoming Mexico’s finance minister in 2006.

Bank of Israel Governor Stanley Fischer also announced his intention for the job, as the deadline for nominations closed Friday.

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