Luis Ernesto Derbéz Bautista: 1947—: Economist, government official

Since his appointment to the post of minister of the economy in 2000, Luis Ernesto Derbéz Bautista has been at the forefront of many of the policies transforming the Mexican economy. Developing newly-elected President Vicente Fox's much-needed economic reform measures, U.S.-trained economist Derbéz believed that opening Mexico's largely government-run economy to private interests, increasing foreign investments, and encouraging competition among businesses would strengthen the country's financial outlook and increase employment. With 14 years of experience in stabilizing struggling economies through his position with the World Bank, Derbéz described himself as a "very pragmatic person," in an interview with Business Week Online. "What the World Bank has taught me," the economist added, "is that you really have to look at the problem first before thinking that you have a solution for it." Known for his skills as a negotiator, and for his willingness to consider a variety of options in solving economic problems, Derbéz strongly defended solutions achieved by such a consensus. As Silvia Meave Avila noted in Siem pre! he has become known among his colleagues as "amiable, candid … with a willingness to listen."

Derbéz was born in Mexico City, Mexico, on April 1, 1947. Enrolling at the San Luis Potosí Autonomous University, he earned a bachelor's degree in economics in 1970 and decided that he wanted to make that subject his life's work. Traveling to northwestern United States, he earned his master's degree at the University of Oregon, studied at the University of Colorado at Boulder, and then went to Iowa State University to complete his Ph.D. in economics, with a specialty in econometrics—the use of statistics in solving economic problems—and operations research. During his schooling Derbéz focused on macroeconomics—the study of whole economies and the interaction of business sectors—rather than on microeconomics with its focus on more specific economic activity.

Luis Ernesto Derbéz Bautista: 1947—: Economist, government official

After completing his education in 1980, Derbéz returned to Mexico and began his career as a macro-economist. In 1983 he joined the World Bank office in Mexico City, where he oversaw the office's international areas of interest, including Chile, Western Africa, India, Nepal, and Bhutan. Among his responsibilities during his 14-year tenure with the World Bank, Derbéz developed, structured, and implemented financial assistance programs designed to help struggling economies in Africa, as well as in Central and South America. In Chile, Costa Rica, Honduras, and Guatemala in particular, such things as unemployment, political instability, natural disasters, or inept fiscal management had created situations whereby governments were so heavily burdened by debt to the World Bank and other institutions that they could no longer sustain an adequate standard of living for their citizens. In working to help such governments regain financial stability, Derbéz gained exposure to a wide range of financial markets, and became experienced in economic cause-and-effect patterns not only in the banking arena but in other areas of these regional economies. Handling the reform of 35 different economies while at the World Bank made Derbéz an expert at economic reconstruction.

At a Glance . . .

Born April 1, 1947, in Mexico City, Mexico. Education: Universidad Autónoma de San Luis Potosí, B.A., 1970; University of Oregon, M.A., 1974; Iowa State Univerity, Ph.D., econometrics and operations research, 1980.

Career: Banco Mundial (World Bank), Mexico City, Mexico, economist for reconstruction of Chile, 1983-86, chief economist for Central America, 1986-89, chief of operations for West/Central Africa, 1992-94, director of financial and banking operations for India, Nepal, and Bhutan, 1994-97; independent economic consultant, beginning 1997; Government of Mexico, minister of finance, 2000–; instructor at schools including Johns Hopkins University, Instituto Technològica y de Estudias Superiores, and University of the Americas.

Memberships: Supervisory bureau of Opciones y Futuros del Mercado de Valores; board of directors, Pemex (government-run oil company), 2001–.

Address: Office— Secretaría de Economía, Co. Hipódromo, Condesa, 06170, México, D.F.

In addition to his work as a professional economist, Derbéz also found time to involve himself in the academic world, both in his native Mexico and in the United States. In Monterrey, Nuevo León, Mexico, he was professor of economics at the Instituto Technològica y de Estudias Superiores' Graduate School of Business Management, and also served as director of that school's econometrics studies unit and economics department. At Johns Hopkins University's School of International Studies, Derbéz temporarily joined the staff as a guest professor, and also worked for a period as director of the Institute of International Finance, part of the University of the Americas, located in Cholula, Pueblo, Mexico.

Late in his tenure with the World Bank, Derbéz was introduced to Vicente Fox, the Governor of the Mexican state of Guanajuato, by Eduardo Sojo, a former student of Derbéz's. The meeting would prove providential for Derbéz. His credentials and manner impressed Fox, who planned to expand his political career with an eye toward the Mexican presidential election of 2000.

In 1997 Derbéz left the World Bank to form an economic think tank that performed consulting work for both his former employer and the Inter-American Development Bank, located in Washington, D.C. In his role as independent consultant, Derbéz was instrumental in developing and implementing recovery programs for his clients' use when participating in relief efforts in areas whose economies had been hard hit by natural disasters and other catastrophes. Two such areas were such as Honduras and Nicaragua, both of which in 1999 were still reeling from the devastation caused by Hurricane Mitch when it tore through Central America in October of 1998.

Following a period of insurrection that culminated with the Mexican Civil War of 1920, a series of left-wing governments overthrew the country's ruling elite and attempted to institute policies designed to redistribute the country's wealth among the entire population. Beginning in 1929 the country was governed by the Partido Nacional Revolucionario (PNR), which evolved into the Partido Revolutionario Institucional (PRI) in 1949. A left-wing, socialist group, the PRI governed through a central committee, and implemented such policies as the nationalization of Mexico's major industries to help with economic stability. Heavy dependence on petroleum exports caused Mexico's finances to deteriorate during the fluctuating markets of the late 1980s, propelling the economy into a tailspin.

During the 2000 elections, held on July 2nd, Mexico experienced a change in leadership for the first time in almost seven decades, as a center-right-wing candidate was elected under a newly reformed democratic election system. An elated Fox was voted in on the Partido Accion Nacional (PAN) ticket, ushering in a new political era. From former president Ernesto Zedillo, Fox inherited a Mexico where 40 million citizens lived in poverty, and where a high inflation rate and a punishing tax code encouraged corruption at many levels of society. Fortunately, he also benefited from Zedillo's efforts to build trade revenues, stabilize the public sector, and move toward a market economy.

After winning the election, Fox set about building a coalition government, selecting among his cabinet ministers people with contrasting points of view and political affiliations. As part of his economic transition team, Fox appointed Derbéz to the position of minister of the Mexican economy. This appointment came as no surprise to Derbéz, who for the previous year had joined fellow economist Eduardo Sojo in heading a 22-person team of economists to draft an economic plan to guide Fox's first six years in office should he win the presidency.

Derbéz had few illusions about the task ahead of him. Commenting on the problems facing his country as the new administration faced a competitive global marketplace, Derbéz told Business Week Online: "Why is it that our products have such a high cost and low quality? Because there are tremendous distortions in the economy, either because we have oligopolies, lack of competition, or in the public sector we have created distortions either by subsidies or by imposing more restrictions than we should in certain areas." To correct Mexico's trade imbalance, Derbéz planned to make the country's domestic markets more efficient and productive by privatization (allowing businesses to operate without the help of the government), implementing training programs for the unemployed, providing small businesses access to money that would allow them to expand production, and encouraging Mexicans to purchase Mexican-made goods. Such policies, Derbéz maintained, would increase employment—hence income—and allow Mexican businesses to increase their manufacturing output to a scale that would create a balance of trade between imports and exports. Among his specific goals during Fox's administration was the creation of 1.35 million jobs. As Derbéz told Smith: "Stability is the most important [aspect] that we have to preserve in the economy."

In a further effort to position his country within the global marketplace, Derbéz hosted trade ministers from 16 different nations in informal discussions held in Mexico City in the fall of 2001. There topics on agricultural subsidies and the dumping of excess, off-priced goods on foreign economies were discussed. In 2000 Mexico also entered into free trade agreements with Honduras, part of Derbéz's further efforts to bolster the economy of a country he had first worked with while at the World Bank.

In his first few years as minister of the Mexican economy, Derbéz followed the plan he and his colleagues laid out for Fox. He worked to achieve a balance between imports and exports, and also attempted to increase the country's tax revenues by closing tax loopholes and finding ways to motivate "informal workers" such as street vendors and small businessmen to ante up for their share of income taxes. Derbéz also sustained a dialogue with the United States in the wake of the North Atlantic Free Trade Agreement (NAFTA) signed between the two countries in 1994. Issues such as the authorization of transnational trucking and claimed violations in the agreement stemming from protectionist policies implemented by the Mexican congress both demanded the minister's attention. The continued efforts by some members of the Mexican congress to bolster local economies by passing laws imposing trade tariffs on tuna and import taxes on the corn syrup used in Mexico's soft drink industry required counteraction by Derbéz. He strongly lobbied the United States to open its markets to Mexico's tuna industry, pushing for the "Dolphin Safe" certification required of the U.S. Department of Commerce.

In 2001 Derbéz was also appointed to the board of Pemex, Mexico's government-run oil company. Operating in a petroleum-rich country that produces 3.3 million barrels of crude oil a day, Pemex was described as having "refineries … so inadequate that the country must import gasoline," by Simeon Tegel in a Latin Finance article. This appointment could be viewed as a vote of confidence for Derbéz, who was thereby entrusted with the reorganization of a company whose bloated, 118,000-member bureaucracy was estimated to cost Mexico over $1 billion annually.