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U.S.’s piece of Banamex in question

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Kai Ryssdal: This next story involves yet another foreign-sounding name you might not be familiar with. But trust me that it’s going to end up in a place we all know too well. The name in question is Banamex, one of Mexico’s biggest banks. A lot of banks there are actually owned by foreign companies, the result of the Mexican banking crisis back in the mid-1990s. Banamex is owned by Citigroup. So far so good. Except for the banking crisis that we are having here right now — because Citigroup is owned in large part by Washington, which makes Banamex test case number one for a Mexican law that says that foreign governments aren’t allowed to own any part of domestic banks.

From New York, Marketplace’s Alisa Roth explains.

ALISA ROTH: Thanks to the bailout of Citigroup, the U.S. government owns 36 percent of the bank. The Mexican opposition says that’s enough to constitute ownership. If the Mexican Supreme Court agrees, Citigroup could have to sell Banamex. And that would hurt.

Matthew Anderson is a banking analyst at the forecasting company Foresight Analytics. He says Banamex makes up the biggest part of Citigroup’s Latin American portfolio.

MATTHEW ANDERSON: This year it’s been producing added profits of something on the order of 15-17 percent of net profit for Citigroup overall. So it’s a significant piece of the company.

Back in March, the Mexican finance ministry said the U.S. government’s investment in Citigroup was temporary. Now the opposition wants them to reconsider.

A lot of foreign banks own domestic banks in Mexico. And since this financial crisis, a lot of those banks have gotten investments from their governments.

Eugenio Aleman is an economist at Wells Fargo. He says a strict interpretation of the law could create huge problems for the Mexican banking sector.

EUGENIO ALEMAN: They will have a severe liquidity crisis in the sense that they will have to look for other investors that are not linked to any government to come in and invest in this sector.

He says Banamex could find a buyer. But it would be almost impossible to find buyers for all the banks that are involved.

Mexico’s Supreme Court has 30 days to decide if it’ll take the case.

I’m Alisa Roth for Marketplace.

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