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By Stefanie Eschenbacher
MEXICO CITY, July 9 (Reuters) - Mexico's 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 wrought financial chaos and wrecked livelihoods in his country.
Decades later, he must boost investor confidence in a shrinking economy buffeted by what his predecessor and mentor Carlos Urzua called "extremism" that led him to resign on Tuesday with a strongly worded letter.
President Andres Manuel Lopez Obrador on Tuesday named former World Bank executive and long-time ally Herrera to succeed Urzua.
Urzua, who was seen as a moderate policymaker and disciplined manager of public finances, blamed meddling in the finance ministry and ill-thought-out economic policies for his abrupt resignation. It fueled concerns in Mexico and among investors around the world of disarray in the government.
In his first meeting with the media on Tuesday, Herrera said he had the support of Urzua, who he described as "my mentor, my teacher, my leader."
A straight-talker, Herrera is well-regarded among investors who have become accustomed to seeing him at high profile events representing Latin America's second-largest economy. He had already been put in charge of policies close to the president's heart, such as bringing banking to more people.
Mexico was rich in resources "but is a country with a lot of poverty," he told Reuters in an interview shortly after he was named deputy finance minister last year.
He spoke of the importance of focusing on growth without spurring the runaway inflation and currency crises that stunted Mexico in the 1980s and 1990s, themes he referred back to after assuming his new role.
His task will not be easy. 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 $13 billion airport, designate scarce funds to a new oil refinery and forcefully renegotiate gas pipeline contracts with Canadian and U.S. companies have all led to market volatility.