Mexico's Videgaray urges G20 to give U.S. time to OK IMF reforms
By Krista Hughes
WASHINGTON (Reuters) - Group of 20 countries should give the United States time to get planned reforms to the International Monetary Fund through Congress and not rush into short-term workarounds, Mexican Finance Minister Luis Videgaray said on Thursday.
Australian Finance Minister Joe Hockey is urging G20 countries to find a way around an impasse in the U.S. Congress on reforms increasing funding and widening representation at the IMF, and options are due to be discussed on Friday morning.
Videgaray said there would be a window for the U.S. Congress to pass reforms following U.S. mid-term elections in November and short-term fixes, such as ad hoc quota increases for other countries, were not the appropriate route - yet.
"It would be a mistake not to give the United States the opportunity to get it done," he said in an interview on the sidelines of the Washington meetings.
"Maybe the timing is not right in the coming months but I see a real possibility for this to be solved later on, after the November election."
The United States is the IMF's biggest shareholder and the reforms can't move forward unless ratified by the U.S. Congress.
Videgaray also said he was keen to have the IMF renew Mexico's $72 billion flexible credit line, which had never been used but was a helpful insurance policy, especially as the U.S. Federal Reserve normalized policy.
"It's important because of the pull-back in U.S. monetary policy, as monetary policy becomes more restrictive, or goes back to a normal stance, there will be some effects on the availability of liquidity to emerging markets and that includes Mexico, although our fundamentals are probably stronger than some," he said. Discussions were due to start in the second half of the year on renewing the credit line.
Growth in Mexico, Latin America's third-largest economy, is expected to pick up this year after sinking to a four-year low of 1.1 percent in 2013, but downside risks remain.
Videgaray said stronger growth in the United States, Mexico's main trading partner, was a positive for the country as well as already-announced structural reforms.
Mexico was generally well-prepared for the impact of rising U.S. interest rates, he said, but also urged the Fed to avoid a repeat of last year's market turbulence sparked by uncertainty about the timing of its tapering of asset purchases.
"The taper talk was more harmful to markets than the taper itself," he said, noting that a rise in Fed rates would pose a challenge to all emerging markets.
"What also will be very helpful, not only for Mexico but the rest of the emerging markets, is to have a very clear message from the Fed, and for markets to understand what the Fed will do when it becomes time to adjust short-term rates," he said.
"Hopefully it's done in a way (that) the markets understand it and the volatility is not as harmful as it was back in May."
(Reporting by Krista Hughes; Editing by Tim Ahmann and Andrea Ricci)
