| BUSINESSWEEK ONLINE : DECEMBER 27, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- LATIN AMERICAN BUSINESS
The 'Miser' Who's Cleaning Up Mexico's Bank Mess (int'l edition) Vicente Corta is selling off old debts so new lending can begin Vicente Corta talks a mile a minute. But then, the 35-year-old lawyer in charge of mopping up after Mexico's banking crisis is in a hurry. He has $22 billion in bad loans and assets to sell and failed banks that need buyers. ''Time is our worst enemy,'' he says. As the year draws to a close, Corta has some tall tasks ahead of him. Five years after the 1994 peso devaluation, Mexico's banking system is still in a sorry state. Of the 18 banks privatized in the early '90s, only four remain in the hands of their original owners, with the rest either liquidated, merged, or sold to foreigners. As executive secretary of the government's Bank Savings Protection Institute (IPAB), Corta's mandate is to keep a lid on the cost of the bailout--now running at a staggering $93 billion. ''I'm the miser in this story,'' he jokes. Even more difficult, he must help the banks get back on their feet to start lending again. In just a few months, Corta has done more to shake up Mexico's banking system than his predecessors did in four years. Immediately after he took the helm of IPAB in May, he assumed control of bankrupt Banca Serfin, Mexico's third-largest bank, from its leading shareholders, the powerful Sada family of Monterrey. Then, in November, he took over Bancrecer, a midsize bank in the hole for $10.8 billion. Through both moves, Corta sent a strong message that he is ending old gentlemen's agreements that let some bankers hold on to failed banks. The Sadas, for example, won't see a penny from the eventual sale of Serfin. Standard & Poor's Corp. estimates that it will take $5.1 billion to clean up the bank in preparation for a sell-off. LOAN PILE. A straight shooter, Corta seems determined to avoid the mistakes of IPAB's predecessor, known as Fobaproa. That agency was widely criticized for cutting secret deals with banks and low-balling the cost of the bailout. So Corta now issues quarterly reports on the liabilities outstanding. He has also revised upward the estimated cost of the rescue from 14% of gross domestic product to more than 19%. Meanwhile, the IPAB chief is moving quickly to whittle down the pile of bad bank loans he inherited. The task is to sell these liabilities off to firms willing to try to collect on the loans. Corta doesn't expect to recover more than 20% of the face value of the loans. ''We think it would be irresponsible to set too aggressive a goal,'' he says. The important thing is to get the dud loans off the books and create a market for the debt. In October, Mexican bank Banorte paid $275 million for a package of debt that once belonged to Serfin, or just 10% of the loans' book value. Banorte will attempt to collect on the loans, splitting whatever it gets with IPAB. A consortium made up of GE Capital, Goldman Sachs, and Mexican venture-capital firm Promotora Mexicana de Capitales will do the same with a package of loans from collapsed Banco Union that it recently purchased for $90 million. Thanks to the sales, a brand-new loan-collection industry is emerging in Mexico. Players range from Amresco Inc. in Dallas, whose experience in this field goes back to the U.S. savings and loan crisis, to GE Capital and General Motors Acceptance Corp. If they can get debtors to pay, it will be easier for Corta to sell more bundles of debt. But Corta still faces huge challenges in tackling the longer-term problems of Mexico's banking system. Hardest of all is creating conditions for banks to begin lending again. Mexico's opposition-dominated lower house of Congress has balked at a controversial government proposal to convert into national debt the zero-coupon Fobaproa bonds that banks received in exchange for their bad loans. The bonds are a bane for the banks, since they cannot be traded and don't provide any immediate income--which is one reason the banks aren't lending. WAREHOUSE. The bonds also represent an obstacle to the sale of the bankrupt institutions: No buyer wants a bank whose biggest asset is a package of il-liquid securities. To get around legislative opposition, Corta plans to repackage the bonds into tradable IPAB debt, with maturities of six to eight years. He hopes to issue $8.5 billion worth of the new interest-bearing securities early next year. In the meantime, Corta has one unusual job to take care of as well. He must decide what to do with odds and ends he has picked up from his agency's bank interventions. He has a warehouse full of everything from paintings by Mexican masters to 80,000 liters of tequila. If Corta manages to accomplish what he sets out to do, nobody would begrudge him a toast of tequila--unless he can sell the bottle instead. By Elisabeth Malkin in Mexico City _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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RELATED ITEMS The ``Miser'' Who's Cleaning Up Mexico's Bank Mess (int'l edition) Resume: Vicente Corta (int'l edition) INTERACT E-Mail to Business Week Online | |||
