On Tuesday, Mexico's President Andres Manuel Lopez Obrador named deputy finance minister Arturo Herrera as the country's new finance minister, replacing Carlos Urzua, who stepped down earlier in the day.

The new finance minister Arturo Herrera is a pragmatic and respected policy maker who says he was inspired to study economics by the Latin American debt crisis that brought financial chaos and wrecked livelihoods in his country.

Herrera spoke of the importance of focusing on growth without spurring the runaway inflation and currency crises that stunted Mexico in the 1980s and 1990s.

He takes over as finance minister after the economy contracted in the first quarter, with economists warning of a looming recession. Investors are increasingly concerned that Lopez Obrador will drive through his favorite development projects regardless of what the finance ministry says.

"The one calling the shots is Andres Manuel Lopez Obrador," said Ricardo Adrogue, head of Barings' global sovereign debt and currencies group.

Urzua did not elaborate on what policy steps led him to resign, but decisions by Lopez Obrador to cancel a partially built a 13-billion-U.S.-dollar-airport, designate scarce funds to a new oil refinery and forcefully renegotiate gas pipelines contracts with Canadian and U.S. companies have all led to market volatility.

Herrera now faces a balancing act of meeting a one-percent primary budget surplus target that has helped offset market worries about government policies and kept the peso broadly stable, while reviving the growth that Lopez Obrador said on Tuesday was his priority.

To achieve that Herrera must spur private investment and fend off downgrades from rating agencies worried about indebted state-oil company Pemex. He must also handle the frictions with others in the government, alluded by Urzua in his letter.

"Herrera has been the face of Mexico’s finance ministry in meetings with international investors in recent months and is a credible choice," said Abbas Ameli-Renani, an emerging markets portfolio manager at Amundi.