Photo: Banxico

By RICARDO CASTILLO

The last brawl in this legislative year in the Mexican Congress was over the so-called “Monreal Bill” that was stuck in the middle of a verbal debate and its vote postponed until February.

The bill is also known as the “Bank of Mexico,” or “Banxico Bill,” and it has already passed with leeway at the Senate, and it seems it that its proponent, Senator Ricardo Monreal, could have easily shoved it through the National Regeneration Movement (Morena) party now controlling the Chamber of Deputies. Yet, he opted for postponement.

The bill proposes that Banxico buy all cash dollar surpluses available in banks and exchange houses and add them to the international reserves.

The first to cry foul over the proposed bill was the Banxico board of directors, who struck the panic button, first because having Congress meddle in their exclusive affairs is a breach to their constitutional autonomy, and second, because this bill – they claim – “could” turn Mexico into a money-laundering haven.

The outcry from the Banxico execs, beginning with two appointees by Mexican President Andrés Manuel López Obrador (AMLO), Gerardo Esquivel and Jonathan Heath, was followed by that of Banxico President Alejandro Díaz de León. They issued a press release after the Senate approved the bill claiming their point of view was not taken into consideration by the Monreal-controlled Senate.

Last week. all hell broke loose in the Mexican press with opinions stemming from members of the Mexican Bankers Association, and even with anti-Morena news hawker Leonardo Kourchenko (of El Financiero-Bloomberg) claiming that the U.S. Treasury Department “could send a note of estrangement” to the López Obrador administration. Fake news, thus far.

Dozens of finance executives were interviewed by financial media sources and they all seem to be against the bill, but, at the end of the day, nobody seems to be sure why. Their answers are full of what could happen, maybes, but no final resolutions.

Monreal caved into the press onslaught and, along with Chamber of Deputies Political Governance Junta Head Deputy Ignacio Mier Velazco, announced a two-week meeting with the plaintiffs during January to have a viable bill ready for vote on the Chamber of Deputies floor when the time comes.

Some claim the bill is intended to benefit Banco Azteca owner Ricardo Salinas Pliego. In the sequence of recent events, Banxico Vice President Jonathan Heath after Salinas Pliego came out publicly in an interview with the daily El Universal, said he was in favor of the Monreal Bill.

The law itself says Banxico will reap in all dollar-denominated cash from banks in order to add it to Mexico’s international reserves. These dollars will have been legalized by the banking system; therefore, there is no chance of money laundering. In addition, Banxico would not buy dollars directly from customers.

Another point of the bill is that, currently, approximately $5 billion are exchanged by Mexican banks directly for pesos and these same banks sell about $1 billion directly to the public.

The remaining $4 billion, according to an October Mexican Stock Exchange report, are bought up by the private U.S.-owned Bank of America and exported back to the United States, for a small transaction gain, of course.

All other dollars and other currencies, for that matter, mostly in remittances and tourism prepays, are transacted electronically, hence they are under firm control by the banks.

The bill would now have these dollars stay in Mexico and, again, be added to the international reserves, which under López Obrador soared from a depleted $172 billion to a current $194 billion.

Monreal and Mier have alleged that they are bent on passing the law when the vote at the Chamber of Deputies comes.

The bill’s ultimate objective is help the thousands of Mexican workers who send their remittances to Mexico and assure they get the best exchange rate in the marketplace.

Some critics claim the Banxico dollar procurement is a demagogic move to garner votes, particularly on election year such as 2021, when the entire Chamber of Deputies’ 500 seats are up for grabs by political parties.

López Obrador intervened at some point to ask the Banxico executives to “calm down” since the bank’s autonomy is not under threat. He said that they should be considering changes since the bank’s policies were drafted 20 years ago, and “it’s time for change.”

Monreal said that in the upcoming gathering “with all interested institutions” the objective will be to come up “with a finished legislative product in the first half of January that maintains and respects Banxico’s autonomy, but also that updates procedures for the benefit of the people.”

That is where things stand now and we will surely be hearing more on this subject starting next year.

…Dec. 21, 2020

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