A new kind of nationalisation

October 20, 2009

I’m collecting oddities and ironies from the financial crisis, and yesterday I came across another great one.  Citibank is in trouble in Mexico.  Not because Mexico has been taken down by the financial crisis – Citibank’s operations in Mexico are in fact generating 15% of the bank’s global profits – but because the Mexican Supreme Court is likely to rule that Citibank’s ownership of Banamex  is illegal. Why, you might ask? Because Citibank is partially owned by the US government, and the Mexican constitution does not allow foreign governments to own Mexican banks.

The history of Mexican financial institutions in the 20th century swung back and forth between government and private ownership, landing firmly on the side of private ownership by the 1990s as Mexico prepared for further integration with the US and Canadian economies via NAFTA. Banamex, Mexico’s largest bank, has been at the centre of debates about money and politics in Mexico since the Revolution, when Pancho Villa took it over to prevent it acting as the Central Bank to dictator Porfirio Diaz. It was privatised, nationalised, privatised again and then recapitalised by the government in the wake of the 1995 Tequilla Crisis. In 2001, Citibank purchased it. Now, less than a decade later, Banamex has been renationalised by the back door by the big neighbours to the north. The same neighbours which advocated for privatisation so vociferously in the 1990s? The ones whose economic model the Mexicans were imitating when they re-established private financial companies? Yes, those same ones.

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