President Zedillo plans to begin subsidizing the nation’s richest citizens: its private bankers.
This text originally published: 15 September 1999
Earlier this year, La Quinta Raza reported on the Mexican government’s cancellation of the “tortilla subsidy”, which for years maintained the price of this basic food staple at an affordable level for Mexico’s estimated 45 million poor. The subsidy was deemed too costly by a government trying to trim its budget in order to present a streamlined operation to foreign investors and lenders. Now, in a cold, marked-oriented turn, the administration of President Zedillo plans to begin subsidizing the nation’s richest citizens: its private bankers.
Mexico’s government is obsessed with keeping its banks “attractive” to international investors. Since 1990, through a program called Fobaproa (the Banking Fund to Protect Savings), the government has saved its poorly-run, corrupt banks by using public fund to purchase portfolios of the most difficult-to-collect-upon loans from the banks. In this manner, the banks unload holdings they’ll probably never be able to collect on to the government via Fobaproa, thereby transferring the heavy financial risks to a public, rather than private, institution. This gives the banks an “easy out” from their past poor loaning policies, with the significant added bonus of charging the government high interest rates on the repayment of these overvalued holdings. To the investment-minded outsider, the banks look lean and healthy and the government appears committed to keeping Mexico safe for investors. Along the way, the ruling PRI party gets a few million dollars in campaign contributions (for instance, $72 million for the state of Tabasco) to keep the whole mechanism rolling. Sounds great. So, who loses?
The plan to shift the annual $400 million from the tortilla subsidy to the private banks—who will actually receive ten times the old tortilla allotment, or an astounding $4 billion per year—provides a clear example of who and what matters to the Zedillo administration. It also demonstrates the tremendous social cutbacks necessary for the government to sustain the careless and thoroughly corrupt Mexican banking system. As the Mexico City daily La Jornada recently reported, the money spent by Fobaproa to salvage the banks between February 1995 and June 1999 is equivalent to approximately 170 years (1830-1999) of Mexico’s accumulated public external debt, or $85 billion. Considering that because of Fobaproa the banks’ old debts are now de facto public ones, there is little to suggest that either of those figures will be shrinking any time soon.
Amid all these astronomical numbers, it is worth repeating the very basic fact that the average wage in Mexico is about $3.50 per day. Each cutback in social spending puts essential goods and services more out of reach for millions of Mexicans. In the name of sound banks which appeal to foreign elites with extra cash to invest, Mexico’s government and ruling classes are committing economic genocide. And laughing all the way to the bank.
Graphic: José Guadalupe Posada
First published in La Quinta Raza Broad Sheet/Hoja Grande, July-Sept 1999.
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