© Rainforest Action Network, 2001
August 10, 2001

PRESS RELEASE

In a move to expand their global consumer base and further consolidate power in the Global South, on May 17th Citigroup spent $12.5 billion last week to merge with Mexico's 2nd largest bank, Banamex. The move makes Citi the largest financial institution in Mexico, as they already operate the Banco Nacional de Mexico SA. The Citi-Banamex merger is the largest financial services transaction in any emerging market and the biggest corporate deal in Mexican history. The move will place Citigroup in control of one of the major - and proven - money laundering institutions in Mexico and allow Citigroup (first time for a US company) to penetrate the Mexican stock market.

While celebrated by Wall Street and the business press as an exciting indication of good faith in developing markets and a step closer to the "new world order", the deal is emblematic of the corporate financial system's modus operandi : blind maximization of shareholder profits at the expense of the long-term health of the environment and communities. And shareholders are making out big--to the tune of $7.5 billion in profits from the deal - while Mexican taxpayers are bound by the bank bailout deals to pay off $3.8 billion in bad debt. Once again, the global elite receive the benefits at the expense of Mexican taxpayers and the poor.

Mexico City governor Andres Manuel Lopez Obrador spoke out agaist the merger, saying that the terms were brokered so that Citi could avoid taxes on the deal. Payments to public budgets would amount to 3 billion dollars, nearly 1/4 of the revenue President Fox hopes to raise from a fiscal reform program that includes increased taxes on the sales of food and medicine.

The deal is also consistent with Citi's history of capitalizing upon relationships with countries with corrupt governments. Through their private bank, debt-equity swaps, and illicit money laundering schemes, Citi promises to make out big. And given their shady track record with Mexico, going as far back as 1929, all indicators point to a deepening of destructive fiscal policies and further corruption.

For instance:

** In 1995, most Mexican banks were technically bankrupt. The peso collapsed, and an audit revealed a financial system replete with shady and corrupt practices including $7.8 billion in questionable loans to roughly 3000 political elites. Then Secretary Treasurer Robert Rubin (now chair of Citigroup's executive committee) engineered a bank bailout that saved the Mexican government from defaulting on billions of dollars worth of debt. The bailout could end up costing as much as $105 billion--about $1030 for every man, woman, and child in a country where the per capita gross domestic product is just over $4600 and 40% of the population lives in abject poverty. Banamex's viability was in question until Rubin came into the picture--perhaps it's back-scratching time?

** In 1999, Citigroup came under fire by Congress and the General Accounting Office for illicitly laundering (1994) over $100 million in drug money for Raul Salinas, brother of the Mexican president. It was also found to be complicit in the laundering of money for corrupt officials from Nigeri, Pakistan, and Gabon through its exclusive private banking operations for the rich.

** In 1999, then Treasury Secretary Rubin led an "all out" offensive (Operation Casablanca) against Mexican money laundering. One of the banks targeted was Banamex which was exposed as being a willing participant in the trade. U.S. Customs Agent Bill Gately, who later retired in disgust, accused Rubin (on "60 Minutes") of deliberately shutting down the investigation before it got to the highest levels and particularly before it began to implicate U.S. banks

** Banamex owner Roberto Hernandez is overtly connected to illegal drug traffic and has lost a lawsuit against a Mexican publisher after the courts found that allegations connecting Hernandez to a major cocaine smuggling operation were well substantiated. Hernandex will now join Citibank's board. The link between cocaine and drugs is a familiar story at Citi since November 2000 when an AP story exposed Marc Weill, 44, the son of CEO Sandy Weill, as having a cocaine addiction. After the story ran, he had to relinquish control of Citigroup's $113 billion investment portfolio.

The NY Times describes the merger in the following words, "institutions are taking power where individuals once reigned, and the border laid down more than 150 year ago is beginning to fade". This is true more than ever, given the increase in US/Mexico trade ($275 billion/yr) since NAFTA--a trade agreement that Citi lobbied hard to implement, and that has led to the accelerated destruction of Mexico's environment, deterioration in working conditions and abuses of human rights. And with the Banamex merger, Citi officials are setting their sites towards infiltrating the US Hispanic market, valued at an estimated $600 billion. According to the chairman of Banamex, Roberto Hernandez, the deal with Citigroup would provide "the financial integration we need to accelerate economic development in a world of free trade and globalization".

Unfortunately Citi's idea of development comes at a high cost to the environment, communities, and future generations--a cost we can't afford to pay.

Press Contacts:

Patrick Reinsborough

Ilyse Hogue

Telephone: 415-398-4404 Error: Unable to read footer file.