Mexico's Ortiz, anti-inflation warrior, to leave cenbank

MEXICO CITY Dec 9 (Reuters) - Guillermo Ortiz, Mexico's central bank governor, helped rescue his country from economic disaster in the 1990s and kept politicians at arm's length to win the respect of investors and policy makers.

But on Wednesday, President Felipe Calderon declined to nominate him for another term, instead selecting Finance Minister Agustin Carstens to lead the central bank beginning in 2010. The Senate is expected to approve the pick by the end of the year. For details, see [ID:nN09230198]

The son of a general who fought in the Mexican Revolution, Ortiz, 61, became one of Latin America's most respected central bankers by attacking high inflation and bolstering Banco de Mexico's independence, clashing openly with President Felipe Calderon in 2008.

"In monetary policy circles, Guillermo Ortiz is considered quite the rock star," Dallas Federal Reserve Bank President Richard Fisher told Reuters last year. "For Mexico to have such a successful central bank is very reassuring to the global financial community."

When Ortiz took charge of the central bank in 1998, inflation was running higher than 15 percent. By 2008, his policies had tamed it to one of the lowest levels in Latin America.

"Without any doubt, the mandate is to keep medium-term inflation expectations under control," Ortiz told Reuters in 2008, when he came under pressure to focus more on boosting growth as the global financial crisis gathered force.

His commitment to fighting inflation also led to a tepid response to the slumping economy.

In February, the central bank slowed down cuts in interest rates, citing inflation. Investors, who expected bold moves to prop up the economy, responded by dumping the peso.

"The central bank (was) contributing to the very volatility that they (were) trying to avoid," Morgan Stanley economist Gray Newman said at the time.

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Mexico's central bank was legally autonomous before Ortiz took over, but he made the bank independent of politicians in practical terms.

In June 2008, concerned about runaway prices caused by a world food supply crisis, Ortiz raised the bank's key interest rate days after Calderon publicly pressured him to cut borrowing costs to boost growth.

Ortiz received his baptism by fire in 1994, when incoming President Ernesto Zedillo named him finance minister days after an unexpected devaluation of the peso that led to a harsh recession. During the so-called Tequila Crisis surging interest rates led thousands of families to default on their mortgages, and Mexico's banking system was devastated.

Ortiz, who plays tennis and scuba dives, helped steer the country out of recessionary chaos, as the government hiked taxes and restrained spending, slowly winning back Mexico's credibility on Wall Street.

Ortiz suffered a personal tragedy when his brother Alejandro was gunned down in front of his house in August 1997 in Mexico City. The motive in the murder has never been fully explained.

For other stories, see [ID:nN09130908] [ID:nN09232034] [ID:nN09168868]

(Editing by Jeffrey Benkoe)