Mexico prepares contingency plan for U.S. election: Carstens

MEXICO CITY (Reuters) - Mexico is readying a contingency plan for an "adverse" result in the U.S. presidential election, said Central Bank Governor Agustin Carstens, who has previously stated that a victory for Donald Trump would hit his country like a hurricane.

"If the adverse situation materializes it's foreseeable that the Mexican authorities respond in some way," Carstens told Milenio television late on Wednesday. "It's a contingency plan that we're discussing with the Finance Ministry. We hope we don't have to use it."

Without naming Republican nominee Trump, Carstens said there was an "adverse" candidate for Mexico in Tuesday's U.S. election, which is due to be held on Nov. 8. He also noted there could be market volatility following the vote, regardless of whether Trump or Democrat Hillary Clinton wins.

"Either way, we the authorities would need to adjust our policy position if it's necessary," he said.

Carstens did not provide details of the contingency plan.

Trump's threats to tear up a trade deal with Mexico, build a massive border wall and his attacks on U.S. companies investing there have spooked investors, hurting the peso.

Interest rate increases and interventions in the market have been Mexico's main tools to support the peso.

Senior officials from the Bank of Mexico as well as the Finance and Economy ministries were holding discussions on Wednesday about U.S. election scenarios, an official said ahead of the talks, speaking on condition of anonymity.

Economists at 4Cast said on Thursday they believed the Bank of Mexico will attempt to smooth the transition to a Trump presidency using a combination of currency reserves and rate hikes, possibly to the tune of 150 basis points.

On Wednesday, Finance Minister Jose Antonio Meade said when volatility is caused by global concerns, such as jitters over the U.S. election outcome, intervening in the market would be like "pouring drops of water into the ocean."

"It is not an instrument that would work," he said.

Carstens has said monetary policy could change depending on the U.S. election result, noting that a favorable outcome for Mexico might obviate the need for the Bank of Mexico to follow any impending U.S. rate hike.

On Sept. 30 Carstens likened a Trump win to a hurricane hitting Mexico, and said a Clinton victory would be better for the economy.

Maintaining Mexican inflation close to its target rate of 3 percent would be the central bank's "guiding principle" going forward, Carstens said.

(Reporting by Dave Graham and Adriana Barrera; Editing by Alistair Bell and Bill Trott)

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