(Recasts with Carstens’ rejection of Trump plan)
By Michael O‘Boyle
MEXICO CITY, April 12 (Reuters) - U.S. presidential candidate Donald Trump’s proposal to force Mexico to pay for a border wall by threatening to block remittances from illegal immigrants would be a major violation of Mexicans’ rights, Mexico’s central bank governor said on Tuesday.
The Republican candidate said last week that if elected in November, he would use a U.S. anti-terrorism law to cut off such money transfers unless Mexico made a one-time payment of $5 billion to $10 billion for the wall.
Mexican Central Bank Governor Agustin Carstens, speaking in Mexico’s Congress, dismissed the idea.
“The remittances are the property of the people that make them and they have every right to be able to carry out international transfers,” Carstens told reporters. “So it would be a serious violation of the property rights of our fellow citizens abroad and this measure would be completely unjust.”
The U.S. remittances are worth roughly $25 billion per year, or close to 2 percent of Mexican gross domestic product.
Separately, Carstens said Mexican inflation should be close to its target rate of 3 percent toward the end of 2016, although the bank will watch that weakness in the peso currency does not stoke price pressures.
The peso fell sharply against the dollar from late 2014 through early February, when the central bank carried out a surprise rate hike. That and other steps taken by Mexican policymakers have helped stabilize the peso, and there had been less speculation against it since, Carstens said.
Trading at around 17.46 per dollar on Tuesday afternoon, the peso is noticeably stronger than when it hit a record low of nearly 19.45 per dollar on Feb. 11. However, it is still down by more than 25 percent against the dollar in the past 18 months.
The peso’s drop has yet to spur a significant jump in inflation, which stood at 2.6 percent in the year through March.
The peso has been hit by a decline in crude prices and Carstens said federal support for Mexico’s state oil giant Pemex could help the currency follow recent oil market gains.
The governor also said the output gap in Latin America’s No. 2 economy should remain negative this year.
“To the extent that the gap closes, we could have more inflationary pressure, which could prompt the bank to raise interest rates, especially to consolidate convergence in inflation towards the 3 percent rate,” Carstens said. (Additional reporting by Adriana Barrera; Editing by Bill Trott)