MEXICO CITY (Reuters) - The financial whiz kid of Mexico’s next government got into economics after spending hours standing in line to buy milk.
In the 1980s hyperinflation was so rampant the government imposed price caps on basic goods, leading to shortages that forced even middle-class families to wait at store counters.
“In those days you could only buy one or two liters of milk and you had to queue up in long lines,” Luis Videgaray, 44, recalled in a television interview. “It was that environment, when I didn’t understand what was happening to us, that prompted me to study, to become an economist.”
Mexico is far from a crisis now but its new leaders are sensitive to comparisons with faster-growing competitors, such as Brazil and China.
President-elect Enrique Pena Nieto, who takes office on December 1, has promised to overhaul taxes and boost competition in key industries in pursuit of 6 percent annual growth. Videgaray, Pena Nieto’s right-hand man and leader of his transition team, is well regarded by investors and tipped to be finance minister or take a top position overseeing government policy.
He will be key to shepherding economic reforms through Mexico’s divided Congress, negotiating with lawmakers both within his own party and on opposition benches to show the new government can deliver on its promises, and quickly.
“It’s important to have a big reform at the start of the administration,” Videgaray told Reuters earlier this year.
The Institutional Revolutionary Party, or PRI, is returning to power after 12 years in opposition and has pledged to leave behind a past marred by corruption and cronyism.
Videgaray is seen by many as having the right mix of academic qualifications, private sector experience and political know-how to muscle through the planned changes, which have spurred foreign investors to pour $57 billion into Mexican stocks and bonds in the first nine months of 2012 - a record for Mexico and almost five times more than they invested in Brazil.
Known to his staff as “El Doctor” for his academic achievements, Videgaray is respected by opposition policymakers.
Domitilo Posadas, a former State of Mexico congressman from the leftist Party of the Democratic Revolution (PRD) who knew Videgaray when he was the state’s finance minister, said Videgaray was a quick learner and always kept his word.
“Everything agreed to was delivered. Everything,” he said.
The son of a bank employee and a lawyer, Videgaray helped care for his younger brother and sister from the age of 11, when his father died and his mother returned to her career.
After joining the PRI in 1987, the year that inflation peaked at 132 percent, he studied law and economics alongside current Finance Minister Jose Antonio Meade and worked briefly in the finance ministry.
But he broke the mould with a stint at investment bank Protego, founded by former finance minister Pedro Aspe, giving him the market sophistication that has helped him impress financial audiences in road shows in New York and London.
“(I) was very impressed by his dynamism and understanding of the issues. A lot is expected of the incoming administration, and he will be instrumental in keeping the dialogue moving and focused,” said Will Landers, who oversees $4.7 billion in Latin American assets at BlackRock.
It was during his seven years at Protego that Videgaray first met Pena Nieto, then a young state congressman, while they were working on ways to restructure the State of Mexico’s debt.
The two hit it off and when Pena Nieto was elected governor of the State of Mexico in 2005, he named Videgaray as state finance minister, surprising many by picking an outsider.
“I think it speaks very well of both of them, they both took a risk,” said banker Carlos Sales, another Aspe protégé who has known Videgaray since he was in high school.
One of Videgaray’s first acts as the State of Mexico’s finance minister was to enforce the often-ignored car registration tax - including on cars owned by his cabinet colleagues - to help boost revenue.
Within four years, when he left to become a federal congressman, the state’s debt had fallen about 20 percent.
Those close to Videgaray say he is serious, hard-working and rarely lets anything ruffle his calm demeanor.
Although some see him as arrogant, friends say this is undeserved and note he is not one for small talk at meetings, which can last as little as 15-20 minutes - brief for Mexico.
“He’s a very efficient person, he doesn’t waste time on things that are not going to have an impact,” said security analyst Alberto Islas, who studied with Videgaray at the Massachusetts Institute of Technology in the United States.
An avid reader as well as a fan of the Pittsburgh Steelers, an American football team, Videgaray also has a reputation for having an answer to everything, or at least trying to.
“Maybe that is his weakness,” said Fernando Gomez Mont, a former interior minister in the conservative government of outgoing President Felipe Calderon. He nonetheless rates Videgaray highly.
Mexico’s economy, which has averaged 2.6 percent annual growth over the last two decades, is held back by oligopolies in key industries, low taxation, high income inequality and weak domestic demand, and is very dependent on the United States.
Increasing competition in the energy sector and boosting the tax take are the new administration’s priorities. Videgaray has not given details of the planned reforms, but his first-hand experience of economic mismanagement in the 1980s helps underpin his commitment to boost competition, and he wrote his PhD thesis on the impact of oil price shocks on countries reliant on oil revenue - like Mexico.
His success in making tax collection more efficient in the State of Mexico also signals a tougher stance on tax evasion. Fiscal reform might also include scrapping a sales tax exemption for food and medicine, he told Reuters.
At 18 percent of GDP, Mexico’s 2010 tax take was the lowest in the Organisation of Economic Co-operation and Development. Tax expert Herbert Bettinger estimates efficient collection alone would add 1 percentage point.
Videgaray, who created a furor by tweeting a photo of a Workers’ Party deputy sleeping during a session of Congress, will have to take care during the delicate negotiations not to alienate members of opposition parties like the conservative National Action Party, which is more likely to support sales tax increases than others, and the leftist PRD.
He will also have to convince elements of his own party of the need for more taxation and competition for Pemex, including old-timers who may resent his closeness to Pena Nieto and his role as campaign manager in vetting aspiring PRI candidates and weeding out any who had the potential to embarrass.
But those who know him say this should be no problem.
“Luis is a born negotiator,” Aspe said in response to an emailed question. “He knows all the themes on the public policy agenda deeply, he knows how to listen and how to accommodate the suggestions of others without losing sight of the big picture.”
Additional reporting by Dave Graham, Anahi Rama and Miguel Gutierrez; Editing by Kieran Murray and Phil Berlowitz