Mexican Govt takes over nation’s banks

Press, 3 September 1982, Page 6

Mexican Govt takes over nation’s banks

NZPA-Reuter Mexico City Mexico has nationalised all private domestic banks, imposed foreign exchange controls, and ordered banks to close until Monday to stem a huge flight of capital which has left the country virtually bankrupt. The sweeping measures were announced by President Jose Lopez Portillo in his annual State of the Nation address yesterday amid fears that Mexico’s crippling cash shortage could cause social and political unrest. The immediate reaction by local bankers was one of incredulity, and long queues quickly built up outside bank credit machines which offer cash to card-holders. Many employers said they would not be able to meet their weekly payroll because of the banks’ closure. Mr Lopez Portillo blamed the flight of capital for most of Mexico’s financial headaches and estimated that in the last two to three years at least $22 billion had left Mexico, mainly to the United States. He suggested that Washington should look into the possibility of recycling back to Mexico credits equivalent to capital funds deposited or invested in the United States by Mexicans. He said that Washington should be understanding and generous and agree to open talks on the' issue. Carlos Abedrop, president of the Mexican Bankers’ Association, said that the President’s assertions that private banks were responsible for encouraging capital flight were unjust. Manuel Clouthier, president of .Mexico’s Business Coordinating Council, said that the sweeping monetary

measures were regrettable, and these should have been put to a vote in a national referendum. Left-wing opposition parties welcomed the Government’s move. The leader of the Unified Socialist Parties of Mexico, Arnoldo Martinez Verdugo, said: “All. revolutionary and patriotic forces throughout the country should form a common front against any reactionary resistance to the measures.” Mexico’s crisis, caused partly by a drop.in the price of oil, its main revenue earner, has forced the Government to twice devalue the peso this year, to freeze dollar bank accounts, and to stretch out repayments on $BO billion of foreign debt. It was reported from Toronto, Canada, yesterday that the International Monetary Fund expected to have SUS4.S to $5 billion ready for Mexico by the end of next month. Mexico’s financial plight is

a main source of concern for many of the Finance Ministers and central bankers who have begun arriving for the joint annual meeting of the I.M.F. and World Bank which will start next week. A team’of I.M.F. officials has just concluded a round of talks in Mexico City and some members of that group were now in Toronto, sources said. The aid would be a combination of a three-year conditional loan tied to the performance of the Mexican economy and an infusion of money from I.M.F. funds set aside to help countries suffering from export problems, they said. When Mexico ran into severe financial problems earlier this (northern) summer Mexican officials began holding talks with various banks to see if they could defer some payments on its debt, the world’s largest. The commercial banks agreed to postpone collecting the principal they were owed by Mexico for three months while the country tried to recover from its financial problems. In addition the Bank for International Settlements, which represents the main central banks of the world, has put together SUSI.BS billion for Mexico. But the commercial banks and the 8.1.5. made their loans conditional on the I.M.F.’s making a big loan to Mexico and requiring it to adopt economic austerity measures. The prospect of such measures is the subject of heated debate in Mexico, where some opposition political leaders are complaining that the Fund will have too much say over their economy.