International Business: MEXICO
BANAMEX' HERNANDEZ: THE CRISIS COULD BE OVER BY CHRISTMAS (int'l edition)
Roberto Hernndez has been viewed as Mexico's top banker since he led an investor group that bought the country's largest bank, Banco Nacional de Mexico, from the government in 1991 for $3.23 billion. At his art-filled office in a sumptuous, colonial-era Mexico City palace, the Banamex ceo spoke with business week Mexico City Bureau Chief Geri Smith on the challenges facing Mexico's banks.
Q: How long will it take for the economy to pull out of crisis?
A: We figure that it will take six months to [return to normal] once the financial markets stabilize. And they are already stabilizing--interest rates and inflation are down. If we look ahead, in September, the situation should be different.
Q: When will we see real improvement in the economy?
A: In 1996. But before that, people will begin to make investment decisions, anticipating recovery.
Q: What do you think of President Ernesto Zedillo's leadership?
A: Zedillo's diagnosis of the crisis has been right on the mark. I think he took the correct measures. We must let a little time go by...and people will see that it's true. People wanted to hear the truth, and that's what they're hearing.
Q: Who is to blame for the huge jump in past-due loans in Mexico?
A: When banks were privatized in 1991, total credit to the private sector was just 14% of gross national product. By December, 1994, it was approaching 40% of GNP. This had been an economy unaccustomed to using credit. It was a radical change. People took on more credit than they should have, and the best [credit] decisions were not always made [by the banks].
Q: Your recent $206 million bond offering was well received. Was that a surprise?
A: We've opened a door. Other banks and companies will do it, too. Back in March, we thought it would take years to [get back into the international financial markets]--it took five years after the 1982 crisis. It's very important that we have done it in just a few months.
Q: Where will the peso be in December?
A: I personally think it will be weaker [than today's 6.2 pesos per dollar]. But people have to understand that inflation is dropping dramatically. In May, we will have one-half the inflation that we had in April. Exports are growing, thanks not just to the devaluation but also to investments made in the private sector in the past four years in new equipment.
Q: What is the aim of your new joint venture with Wells Fargo Bank?
A: We hope to develop binational products aimed at [millions of migrant workers and other Mexicans] who spend part of the year in California and part of the year here.
Q: You're advertising that you have the lowest interest rates on credit cards in the market--around 70%. Would you advise clients to use their credit cards?
A: Use the cards, yes, but not the credit.