Fox may unveil secrets in Mexico's bank bailout

MEXICO CITY (Reuters) -- The shady secrets of Mexico's bank bailout following the collapse of the peso in 1994 and 1995 are likely to come to light when President-elect Vicente Fox takes office, ushering in what is expected to be an atmosphere of greater government transparency, analysts say.

Mexico has been inching closer to revealing lists expected to detail top businessmen involved in dodgy dealings, despite efforts, especially by congressmen from the ruling Institutional Revolutionary Party (PRI), to keep them under lock and key.

Former Coca-Cola executive Fox, elected on July 2 and due to take office in December, has pledged to rid the government of the graft that characterized some past regimes of the PRI, in power since 1929.

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Mexico

"The issue is out there," said Daniel Lund, head of Mund pollsters in Mexico. "Either it becomes a symbol of Fox's ability to deliver on an anti-corruption platform or it becomes an albatross around his neck."

Mexico's banking system nearly collapsed after the peso crashed in 1994-95, causing interest rates to sky-rocket and forcing millions of debtors to default on their loans. The government stepped in to bail out the banks at an estimated cost of $100 billion to taxpayers.

The bailout, widely seen as an exercise in saving the skins of rich, well-connected bankers, angered ordinary Mexicans, particularly given the discovery that some of the bad loans taken on by the government during the rescue had been made illegally.

ENCODED DISKETTES, SECRET PASSWORDS

Congress ordered an independent probe by Canadian auditor Michael Mackey last year to determine whether any banks had received bailouts for losses on illegal loans. Mackey's audit identified some $640 million in illegal loans out of a total of $7.7 billion in transactions he considered possibly dubious.

Many say those are only the tip of the iceberg given that he was denied access to the books of several banks.

Mackey's lists of people and companies who received questionable loans were originally encoded on a diskette to which Mexico's five main parties were given passwords.

In the run-up to the election, all the parties except the PRI handed over their passwords to a congressional commission that was probing the scandal in a bid to force the publication of the lists. The congress had agreed to publish the lists if all the parties surrendered their passwords.

Many believe the PRI has strived to protect party supporters by suppressing the politically sensitive lists.

Frustrated with the lack of progress on the issue, the leftist Party of the Democratic Revolution (PRD) hired hackers to break into the diskette and revealed what it said were the real lists of beneficiaries of irregular loans.

The lists publicized by the PRD contained names of prominent political and business families.

In July, Mackey handed over a code-free diskette containing the contentious files to Mexico's Congress. However, Congress passed the buck to a Permanent Commission dominated by the PRI to decide whether to make it public or not.

A top official at deposit guarantee agency IPAB, in charge of overseeing the aftermath of the bailout, said he didn't expect there "will be many surprises" when the names on the PRD lists are compared with those eventually revealed by Congress.

Political commentator Jose Antonio Crespo was optimistic the lists would be opened, citing changing attitudes within PRI ranks.

"The PRI itself now wants to open the lists as they are fed up with covering up for people and paying the (political) costs of those corrupt functionaries," he said.

Despite the fact the bank rescue had the backing of legislators from Fox's National Action Party, Fox is not expected to allow the matter to be swept under the carpet.

"It will become a big issue for sure because the tab President Ernesto Zedillo is leaving is too costly and Fox could need a major tax increase just to service this debt," said Rogelio Ramirez de la O (correct), an economic analyst at Ecanal.

Copyright 2000 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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