Mexico's Fox pledges effort to strengthen banks

MEXICO CITY, Mexico (Reuters) -- Mexican President Vicente Fox said on Saturday he will work with bankers to strengthen the country's financial system to ensure the financial meltdown that crippled the economy six years ago is not repeated.

"We don't want to be reminded of that December in 1994 when all of us Mexicans in 24 hours lost half our patrimony," Fox said in a speech in his home state of Guanajuato in central Mexico

Fox, in his second week in power, alluded to the economic debacle that followed a shock peso devaluation in the initial weeks of the administration of his predecessor, Ernesto Zedillo. Fox, of the conservative National Action Party (PAN) is Mexico's first president in 71 years not of Zedillo's Institutional Revolutionary Party (PRI).

The 1994 devaluation triggered the country's worst recession since the 1930s, ravaged personal savings and sent interest rates soaring to over 100 percent.

A wave of defaults by debtors brought Mexico's financial system to the brink of collapse, forcing a government bailout estimated to have a final price tag of $100 billion.

Several Mexican banks shut their doors or were bought out by foreign financial groups. Credit, meanwhile, remains scarce, with banks reluctant to lend and borrowers wary of incurring new debts.

Fox said the remaining banks had to work to regain their customers' trust and the government would at the same time work to ensure the system's stability.

Banks "have a social, strategic and responsible function," he said. "For that reason we're committed to supporting, shoulder-to-shoulder, the national financial system so that it once again becomes an ... engine that drives the whole economy."

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