OPINION

Photo: Citigroup

By THÉRÈSE MARGOLIS

Despite the fact that just five months ago, Citigroup CEO Jane Fraser met with Mexican President Andrés Manuel López Obrador (AMLO) at the National Palace, declaring that the international financial group considered Mexico “a country of opportunities” thanks to its economic, political and social stability, the corporation announced on Tuesday, Jan. 11, that it would be pulling out its capital holdings and selling off its ownership of the Banco Nacional de México (Banamex) consumer banking sector — lock, stock and barrel — as soon as humanly possible.

The announcement — which was immediately followed by a 2.6 percent upturn in Citigroup stock on the New York Stock Exchange — came as a serious jolt to Mexico’s financial sector

But that didn’t phase AMLO, who brushed off the matter Wednesday, Jan. 12, saying (via his Interior Secretary Adán Augusto López, since the president is in isolation after having contracted covid-19 for the second time in a year) that his administration considers the matter of “little consequence” and has no interest in acquiring Citibank’s assets, since it is busy attending to other “more important” issues such as its controversial Dos Bocas refinery, Tren Maya tourist train and Felipe Ángeles International Airport.

But while AMLO’s government may not consider the exit of Citigroup — whose Citibanamex constitutes Mexico’s third-largest bank, with 1,300 branches and 12.5 million clients — a matter of concern, it could be a serious omen of things to come in the country’s private sector.

The sad truth is that, while Citigroup has for the last few months been ditching its retail banking affiliates around the globe in a strategic consolidation process (liquidating its consumer franchises in 13 markets in Asia, Europe, the Middle East and Africa), Mexico was its second-largest market internationally, and was presumed to be exempt from the mass sell-off.

In fact, the group’s acquisition of Banamex for $12.5 billion in 2001 was the largest ever in Mexico at the time.

So why Citigroup’s sudden exodus from Mexico?

The answer is simple: Citigroup has lost confidence in the nation’s economy, spurred on by haphazard — and often-illegal — reversals of policies regarding private-sector corporations.

Whether it be the capricious closure of a massive international airport construction project, a headstrong determination to move full speed ahead on a doomed tourist train, an irrational flooding of cash into a moribund oil company, or a mandated retrogression on national energy policies prioritizing dirty sources over clean, Mexico has, under AMLO, won itself a dubious reputation of an unreliable business partner.

Moreover, AMLO has repeatedly taken aim at the country’s financial sector, calling out its members as greedy and corrupt, consitently accusing them of tax evasion and threatening fines and even jail time.

No doubt, Citigroup saw the writing on the wall, and decided to get out while the getting was still good.

And Citigroup is not alone.

According to the Central Bank of Mexico (Banxico), last year Mexico registered the largest outflow of foreign capital in its recent history, 1.63 trillion pesos, compared to 1.89 trillion in 2020.

Moreover, in 2021 there was a historic capital flight of 258 billion pesos in government instruments, constituting the second year in a row with an unprecedented exit.

And with soaring inflation and an even shakier economic forecast for 2022, international companies are fleeing the country in droves.

AMLO, with his buddy-buddy friendships with communist dictatorships like Cuba, Venezuela and Nicaragua, is doing little to quell the flight of foreign capital, and the exit of Citigroup is likely to be just the start of a massive international financial pullout.

True, Citigroup said that it will retain its institutional client business in Mexico, as it has in other overseas markets, but the message is clear that the company does not have confidence in the economic future of the country.

And its leaving could be a strong foreboding of what to expect for the rest of 2022 and AMLO’s next three years in office.

AMLO loves to demonize corporations and despises any company that dares to show a profit.

But without profitable companies to provide jobs, goods, services and — most importantly — taxes, AMLO’s so-called Fourth Transformation (4T) could soon come to a skreaking halt for lack of revenues to pay off his nonproductive proselytes.

AMLO may think that he and his administration have more important things to worry about than the sudden exodus of a foreign financial group, but he does not.

 

 

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