The Lunch That Changed My Career
Shortly after joining a major money center bank as a young twenty-something economist, fresh from grad school and the World Bank, my boss instructed me to have lunch with two women, who were touring the country as part of a U.S. State Department program, which hosted foreign professionals. Though I recall the bank picked up the check, it was a very expensive lunch, nonetheless, as it almost ended my career just as it was getting started.
The only details I had going into the lunch were that one person was an economist from Mexico and the other an interpreter from the U.S. State Department. No problem. Economists love a free lunch.
Exchanging Views On The Mexican Economy
I covered Mexico for the bank and we had a great conversation over lunch about politics, economics and the future of Mexico. I don’t recall ever discussing the name of her employer. I assumed she worked for the government or a private research group.
It was late August or early September, and the country had just experienced a very contentious presidential election. The outgoing president had implemented a stabilization program to bring inflation down by fixing the peso against the dollar. The inflation rate differential between Mexico and the U.S. remained stubbornly high, however, as in 40 percent plus, causing the peso to become increasingly overvalued
Moreover, the Ministry of Finance was notorious for its maxi currency devaluations during presidential transitions. My Mexican friends would tell me with a straight face there was always pressure on the peso after a general election as the outgoing president was taking his money that he stole during office out of the country. I think they truly believed it.
The Peso
The Mexican markets were very nervous at the time and my fellow economists at other major money center banks were forecasting a 50 plus percent devaluation before the new government would take power in December to bring the purchasing power of the currency back in line. I was much less negative and understood such a large move in the peso would reverse the gains in reducing inflationary expectations and blow any credibility of the incoming government.
I had written and published how Mexico was about to get its inflation under control and the economy could then begin to emulate that of an “Asian Tiger” under the new government. My view was much more bullish than colleagues and received a lot of pushback even within my own bank.
Doing The “Dirty Work”
While walking out to the elevator after lunch the valuation of the peso came up. I passed her our monthly foreign exchange newsletter where I stated the outgoing government would probably move the currency slightly, around 12-15 percent, with the current president doing the “dirty work” before the new government came to power.
Lunch over, back to work.
The Call
On a Monday afternoon, about two weeks later, I was in Washington, making due diligent calls to economists at the IMF, World Bank, and the U.S. Treasury, when I received a call from my boss.
“[Gregor], did you hear what happened?”
“No, what’s up?”, I replied.
“Your full name along with the bank appeared in the headline of the lead story on the front page of the Sunday edition of El Universal, quoting you saying that Mexico was about to devalue the peso” (El Universal is or was the New York Times of Mexico at the time).
I was shocked.
Wait, there’s more.
“The President of Mexico called the CEO of the bank and wants your ass on a platter. He is blaming you for causing the Mexican stock market to fall 10 percent today and the Banco de Mexico’s eventual loss of $1 billion in reserves defending the peso because of ‘your big mouth’!”
I Got Screwed
My first thought was seriously?
That woman I had lunch with a few weeks earlier never revealed to me she was a journalist and quoted our entire conversation on record. WTF?
Why the hell didn’t the State Department give the bank a heads up we were meeting with a reporter with one of Mexico’s major newspapers?
Efficient Markets?
Second, there was nothing new in the article.
I had published the same story and stated the same scenario for the peso over and over for the two months after the election. It was so common knowledge. Furthermore, I was relatively bullish on the peso compared to economists at other money center banks.
Efficient markets, my arse. Come on, man.
The very reason I am always long behavioral economics and short efficient markets.
“You better get back to the office, and fast,” he warned me.
The Wisdom Of The Irish
Totally fazed, I hung up the phone and knew I was in deep shit.
I told my good friend, Desmond MAC., a great economist at the World Bank and fellow Irishman, about my now uncertain plight. He tried to calm me down with some words of wisdom, “[Gregor], remember the only bad publicity is an obituary.”
Nice, but it didn’t relieve my growing anxiety.
The next day I flew back home. I walked into the office after arriving from the airport and my colleagues began joking, “ you market mover, you!” I wasn’t amused, not one bit.
I then went into a meeting with my boss explaining there was no way that conversation would ever have been had with a journalist, much less on the record. I then waited for the hammer to drop.
Not So Bad
I called down to our Mexico City office, where a friend said the country manager was livid, as he feared the government would retaliate by withholding business from the bank. His own read, however, after talking with his contacts in the Ministry of Finance, was that though the government was upset, but not so much as the article in its totality portrayed Mexico’s future in a positive light. Furthermore, he thought my number on the devaluation was exactly what the government was thinking and planning. He did say, however, the “dirty work” comment wasn’t playing well in Los Pinos.
“Banker With A Big Mouth”
Every day during the next week the Mexican ambassador to the United States was out publicly talking about the “banker with the big mouth” trying to calm the country’s markets. I was eating humble pie all that week and took his comments in stride, still waiting for the hammer to drop ending my career as an economist just as it was getting started.
No Hammer, Persona Non Grata
The hammer never dropped.
The CEO didn’t throw me under the bus. I thought that was kind of ballsy on his part.
I was told not to travel to Mexico for at least a year or two, however. I was never sure if Mexico’s president officially declared me persona non grata but he did convey to our CEO I wasn’t welcome in the country. I never came close to the Mexican border over the next year.
Later, when Mexico began their historic debt restructuring, I worked closely and became friends with Mexico’s best and brightest, including the current Secretary-General of the OECD, Angel Gurria, and Augusten Carstens, the General Manager of the Bank of International Settlements. Good guys.
Lesson Learned
The moral of my story is that it was one helluva lesson about dealing with the press. It wasn’t the last time I’d be burned by a reporter, quoted with attribution when I made it clear it was only for background and off-the-record. But, at least I always knew it was a reporter on the other side of the conversation.
I have learned through the years most all journalists are true professionals, trustworthy and very few operate on the dark side.
Ironically, the El Universal reporter had the gall to call me a few months after the article asking to do a “follow-up” piece.
Are you ‘freaking kidding me” I screamed at her and hung up faster than the collapse of Theranos!
Mexico Devalues 16 percent
Three months after the article, the new government came to power and announced Mexico’s new exchange rate policy, which was to move the currency down against the dollar by one peso per day. The annualized rate of devaluation equated to 16 percent. Nailed it!
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