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The financial reform: a Mayan prophecy? - en.ElConfidencial.com

"...the country´s financial sector reform, which began under President Carlos Salinas de Gortari in 1989...the banks’ privatization, as well as deregulation...a U.S.-sanctioned process that helped to pave the road to the North American Free Trade Agreement (NAFTA).

A legion of foreign expert consultants and financial institutions were hired...effectively selling the banks. The problem was not rooted in the concepts of privatization and free markets, of course, but rather in the perverse strategy the government connived to pick winners from the start...

...Considering how things played out in the end, keeping foreigners out proved to be a populist yet ultimately futile dose of nationalism.

Mexicans were right to be concerned, however, about the potential dangers of relinquishing control of their banking system to foreign capitals...

...a rather creative domestic consolidation of the Mexican banking sector in favor of hand-picked industrial groups, which played out like this: bank “A” would lend money to group “X” to buy Bank “B”, which in turn would lend money to group “X” to repay bank “A.” Indeed, just as circular as the Mayan Calendar...



...The next phase was the inflation of the financial bubble: the newly-acquired banks went on to take enormous loans from Mexico´s central bank...

...cash flowed with gusto from one bank to another. This led to the heating up of the Mexican economy – later touted the “Mexican Miracle.”...

...1994...the government, to finance its 7% deficit, went on to generate more debt in the form of bonds issued in pesos at high interest rates, but indexed in U.S. dollars (Tesobonos)...

...Zedillo...saw no other option than to set off the bomb by letting the peso float...went into a freefall and interest rates skyrocketed. Banks went into technical default, along with 1,000bps spreads.

In a matter of weeks, Mexico went cash-dry...There was, of course, public outcry and social movements sprung up...

...The most visible of these social movements was called “El Barzón”...their motto was: Debo, no niego, pago lo justo ("I owe, I won't deny it, but I'll pay what is fair")...

...Barzón finally discovered the existence of attorneys...Tens of thousands of lawsuits collapsed the courts since it was easier to put public pressure on judges rather than on remote bankers...

...the larger banks survived (Bancomer, Banamex, Serfín, Comermex, Banorte), and they all, with the exception of Banorte, ended up in foreign hands...“bankers”...made even a bigger fortune from the bailout by selling the banks to foreigners: Banamex went to Citicorp, Bancomer to BBVA, Serfín to Santander, Comermex to HSBC...

...Zedillo was forced to impose severe austerity measures to cut the deficit and make up for the tremendous debt the country had acquired...sharp tax increases, higher interest rates, large budget cuts, and hikes in electric energy and gas prices...drove Mexico directly into a recession...

...Back to the future..."

Zedillo was schooled in the US.

In 1974 he pursued his master's and PhD studies at Yale University. His doctoral thesis was titled: "Mexico's public external debt: recent history and future growth related to oil".