By Anthony Harrup

MEXICO CITY -- Mexican President Enrique Peña Nieto on Wednesday named a former official who has reaped praise from Donald Trump to be Mexico's new foreign minister, as the country prepares for a complex new relationship with the U.S.

Luis Videgaray, a former finance minister and close aide of Mr. Peña Nieto, played a key role in bringing about Mr. Trump's trip to Mexico in late August. He resigned the following week amid the uproar caused by the visit of the then Republican candidate.

"I think Videgaray was the best option to deal with Trump, although it's not going to be easy," said Jorge Chabat, a professor of international relations at Mexico's CIDE university.

Mexico's relationship with the U.S. has been its most important for two centuries, involving not just foreign policy but the country's economic and political stability, Mr. Chabat said, in attributing Wednesday's appointment to preparation for the incoming U.S. administration.

During the campaign, Mr. Trump said he would either renegotiate the North American Free Trade Agreement -- which joins the U.S., Mexico and Canada -- with better terms for the U.S., or pull out of the pact.

He also said he would build a wall along the U.S.-Mexican border to keep migrants out and make Mexico pay for it, and expel unauthorized immigrants from the U.S.

Concerns about Mr. Trump's proposals and his criticisms of Mexico prompted the government to arrange the August meeting, which generated considerable criticism in Mexico at the time and was seen as damaging the government's standing.

Now, with Mr. Trump just weeks away from taking office, Mr. Videgaray, who has a doctorate in economics from MIT, will be in charge of Mexico's foreign policy and the relationship with its top trading partner.

"The instruction to Mr. Videgaray is to accelerate dialogue and contacts so that from the first day of the new [U.S.] administration, the groundwork can be set for a constructive working relationship," Mr. Peña Nieto said. He also called on the new foreign minister to further develop relations with Central and Latin America, as well as with the Group of 20, of which Mexico is a member.

A discouraging sign for bilateral relations came Tuesday when Ford Motor Co. said it was canceling a planned $1.6 billion investment in a new assembly plant in Mexico, and instead will invest $700 million in a new plant in Michigan.

The decision sent the Mexican peso to new lows against the U.S. dollar, as it raised fears that the Trump government will follow through with more protectionist measures that could hurt Mexico's export-oriented manufacturing sector.

The currency closed in New York at 21.4486 to the dollar on Wednesday, after closing at 21.1107 the day before.

Mexico sends around 80% of its exports to the U.S. and receives about half of its foreign direct investment from north of the border.

Mr. Trump took to Twitter to praise Mr. Videgaray the day after the latter's resignation as finance minister in September.

"Mexico has lost a brilliant finance minister and wonderful man who I know is highly respected by President Peña Nieto," he said. "With Luis, Mexico and the U.S. would have made wonderful deals together -- where both Mexico and the U.S. would have benefited."

Mr. Videgaray had been widely seen as the brains behind Mr. Peña Nieto and the driving force behind a series of high-profile overhauls in the past few years, including opening Mexico's closed oil industry to private investment for the first time since 1938.

His appointment to the new post drew some criticism on Wednesday. "He isn't a career diplomat. He could have continued operating from outside the cabinet," said Alejandro Schtulmann, head of analysis at the Empra consulting firm.

Write to Anthony Harrup at anthony.harrup@wsj.com

(END) Dow Jones Newswires

January 04, 2017 19:21 ET (00:21 GMT)

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