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AP: Citigroup-Banamex merger angers Mexican Taxpayers

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  • Alberto M. Giordano
    Mexicans also are distrustful of Citibank after learning it allowed its private-banking division to be used to channel almost $100 million in alleged drug
    Message 1 of 1 , Aug 5, 2001
      "Mexicans also are distrustful of Citibank after learning it allowed its
      private-banking division to be used to channel almost $100 million in
      alleged drug money into Swiss accounts for Raul Salinas, brother of former
      President Carlos Salinas."

      - from Associated Press story

      http://www.nandotimes.com/business/story/55619p-814635c.html


      Business: Citibank acquisition angers Mexican taxpayers who bailed out
      Banamex

      By MARK STEVENSON, Associated Press

      MEXICO CITY (August 4, 2001 12:55 a.m. EDT) - Some say this is how
      globalization should work: A rich U.S. bank expands into a developing
      nation, spreading capital around. Others see Citigroup's acquisition of
      Mexico's second-largest bank, completed Friday, as a classic example of a
      backroom deal concentrating power and wealth.

      Citigroup's takeover of Banamex has weathered questions about money
      laundering, anger among taxpayers who paid billions to bail out the Mexican
      bank, and concern over the fate of Banamex's trove of Mexican art, which
      Citigroup will apparently acquire.

      But for many Mexicans, the biggest question is whether their country - in
      finance, transport, manufacturing - is becoming a mere branch office for
      foreign firms. Almost all of Mexico's financial sector has been sold to
      foreigners over the last three years.

      Few deals so typified the good and the bad of globalization as the $12.5
      billion cash and stock deal sealed Friday on the floor of the Mexico City
      Stock Exchange.

      When it was announced in May, President Vicente Fox called the acquisition
      an "extraordinary" event for Mexico, where banks are poorly capitalized,
      grant few loans and serve less than a quarter of the population.

      "We know we have to participate in globalization," Fox said. "We know we
      have to create financial reserves inside the country and attract them from
      abroad, and that is what this gigantic investment by Citibank in our country
      does," he said.

      Some say Fox was happy for other reasons as well: His college buddy and
      campaign donor, Banamex President Roberto Hernandez, may have gotten as much
      as $3 billion for selling his stake in the bank.

      That wouldn't be too controversial, except that taxpayers spent more than
      $3.4 billion to bail out the bank when it was drowning in bad loans in 1995.
      Little of that money was ever repaid by the bank's shareholders or the loan
      holders.

      Both Hernandez and Fox say none of the sale price should be repaid to
      government coffers. Hernandez has waxed poetic about the global aspects of
      the deal: "The idea was to attack the market head-on and create a truly
      transborder North American bank."

      Others saw it in less glowing terms. "It's not fair that Mexicans subsidize
      with our tax money some juicy business deals that benefit a few," Sen. Jesus
      Ortega said.

      Fox's own policies have fed the growing sense that globalization benefits
      only the rich. The president has resisted a full investigation of the bank
      bailout and has appointed business magnates to key government positions.

      One of those - Carlos Slim, Latin America's richest man, whom Fox briefly
      appointed to the board of the state-owned oil monopoly - hasn't sold out to
      foreigners yet.

      But Slim's telecommunications empire is so far-reaching that, as newspaper
      columnist Marcos Rascon said, "it is present in every aspect of the culture
      ... using the Internet, making a phone call, watching television, going to
      the movies or buying a record."

      The issue of foreign domination is also significant in a country invaded by
      what are known as "los marts": Wal-Mart, HomeMart and other U.S. chains.
      Mexico City, indeed, may be the only place in the world where Woolworth's
      stores - complete with lunch counters - are going strong.

      The foreigners have sometimes ridden roughshod over Mexican sensibilities.
      In June, U.S. retailer Costco drew wide protests when it began to tear down
      a landmark 1940s resort near Mexico City to put up a shopping mall.

      Resentment is sharpened by the fact that, of the nearly 20 banks around
      before the 1994 peso crisis, only a few still exist - and the largest have
      been bought by the likes of Spain's Banco Bilbao Vizcaya or Canada's Bank of
      Nova Scotia.

      And it doesn't help that, along with Banamex, Citigroup will acquire one of
      the largest private collections of Mexican art and real estate, ranging from
      16th-century palaces to great paintings.

      Nationalist fears were assuaged only slightly when experts said the artwork
      apparently cannot be sold or sent abroad by Citigroup.

      Mexicans also are distrustful of Citibank after learning it allowed its
      private-banking division to be used to channel almost $100 million in
      alleged drug money into Swiss accounts for Raul Salinas, brother of former
      President Carlos Salinas.

      None of that proved a problem for regulators in the United States and
      Mexico, who quickly approved the deal.

      "It's a grand case of fraud," said the leader of Mexico's Environmental
      Green Party, Jorge Gonzalez Torres. "It's all part of the Mexican tragedy."



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