Speculation is increasing that Manilo Fabio Beltrones, a member of the Institutional Revolutionary Party (PRI), will bring a formal request before the Mexican Supreme Court this week that may end with Citigroup being forced to sell off its Mexican subsidiary, Banamex. Following the U.S. purchase of a 34 percent stake in Citigroup as a result of the financial crisis, members of the Mexican Senate pointed out that this violated Mexican law, which forbids foreign governments from owning a share in domestic banks. While the finance ministry ruled in March that Banamex was not in violation of the law, due to the transitory nature of the U.S. government’s holding, some analysts see the actions of Mr. Beltrones and fellow PRI members as an attempt to further complicate matters for the Calderón administration, which is currently fighting the PRI over unpopular tax increases for the 2010 budget.
Banamex, which currently accounts for 15 percent of Citigroup’s global profits, is considered a source of pride in Mexico. Formed by the merger of two banks in 1884, Banamex was purchased by Citigroup in 2001 for $12.5 billion. While several analysts stated that Citigroup may benefit from divesting itself of Banamex (which would likely bring $20 billion if sold), Citigroup issued a statement that they plan to repay TARP funds in the near future and put the issue to rest. However, these events - combined with the recent statement of Central Bank Governor, Guillermo Ortiz, that subsidiaries of foreign banks in Mexico should list themselves on the Mexican stock exchange - sent shockwaves through the international financial community. Although Banamex may be the current focus of lawmakers’ attention, other financial institutions where governments have acquired a dominant interest, from Bank of America in the United States to Royal Bank of Scotland, are watching closely. With large investments in Mexican banks, these financial institutions could be the next targets of the Mexican opposition if the Supreme Court rules against Banamex.
Flickr photo by Gary Denness and used under the Creative Commons license
