Calderon Says Peso Rise Doesn't Make `Us Very Happy'

``The exchange rate keeps appreciating, it isn't something that makes us very happy,'' Calderon said at a Mexico City conference today, according to a transcript e-mailed by his office. ``I hope that Banco de Mexico takes appropriate note of what this implies for the equilibriums.''

The peso has strengthened 1.8 percent since Banco de Mexico unexpectedly raised the benchmark interest rate for the first time in two years to 7.25 percent from 7 percent on April 27. The gain reversed a 1.4 percent decline in the year before the bank's move. Today the peso gained 0.6 percent to 10.7455 to the dollar.

Calderon's remarks adds to the criticism of the central bank's move made by two cabinet ministers. Finance Minister Agustin Carstens and Economy Minister Eduardo Sojo both described the interest rate increase as ``premature'' because the economy is slowing.

Mexico's economy grew at an annual 2.6 percent in the first quarter following a 4.8 percent expansion in 2006.

In his speech, Calderon said today's rise in the local currency and stocks reflect sound policies and economic stability. The Mexican Bolsa stock index gained 2.3 percent today.

Calderon reiterated his commitment to fighting crime. He justified his use of the military to seize drug crops and fight traffickers nationwide, saying they had threatened the state. Since deploying thousands of troops after taking office, Calderon said, the government has recovered territory that drug gangs had controlled.

``Yes we have used all of the force of the state in a massive way,'' he said. ``That's because the state, in my judgment, is justified because of this, its ability to guarantee order, legality and the right of citizens.''

To contact the reporters for this story: Adriana Arai in Mexico City at at aarai1@bloomberg.net Valerie Rota in Mexico City at vrota1@bloomberg.net

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