Mexico’s Senate approved on Wednesday, December 9th, a bill that will force the central bank to buy dollars from banks that can’t place them elsewhere, ignoring concerns from policymakers that the bill could make the bank take illegal drug money.
Lawmakers brought the bill to a vote, only hours after top members of the country’s bank association had warned that the bill threatened the autonomy of the central bank and could expose it to sanctions for money laundering if it was approved. The bill goes on to the lower house for a debate and vote.
The legislation would force the central bank to buy up foreign currency from local banks, who end up with excess dollars from cash remittances and tourism. Lawmakers introduced a tweak to the original bill, presented by Morena Senate leader Ricardo Monreal, that said Banxico would not have to buy dollars from any one on government black lists.
Monreal said the bill was needed to help migrants who return for the holidays with wads of cash. “This is no attack on central bank autonomy,” he said. “Banco de Mexico has to be less conservative.
Following money laundering allegations against HSBC Holdings Inc. and Wachovia Corp. over a decade ago, U.S. banks have increasingly severed relationships with Mexican institutions to protect themselves from potential sanctions. That is not much of a problem for the global banks operating in Mexico like Banco Bilbao Vizcaya Argentaria SA or Citigroup Inc., but it crimps business by Mexican banks, which can’t easily unload dollars.
Opposition lawmakers said the bill had been forced through the Senate by President Andres Manuel Lopez Obrador’s Morena party without listening to the concerns of the central bank. The bill was introduced, unexpectedly, late last month.
Alvarez said lobbyists of Grupo Salinas had pushed lawmakers to approve the bill. “Is this bill dedicated to one of the president’s special allies to whom he wants to do a favor?” Alvarez said. Grupo Salinas is controlled by Mexico’s third-richest man, billionaire Ricardo Salinas, whose Banco Azteca has played a key role in disbursing Lopez Obrador’s cash aid programs.
Grupo Salinas spokesman Luciano Pascoe said in a text message that the group did “not have any comments on the rumors a senator spreads.”
Even Senator Nancy de la Sierra, a member of the ruling party coalition, said the issue of migrant remittances was used to justify the bill, though such cash remittances are minimal.
Central bank board member Gerardo Esquivel, who has supported the ruling party coalition, said the bill’s passage “puts international reserves at risk while attacking the Bank of Mexico’s autonomy.” Writing on Twitter, he said he hopes the lower house “corrects this situation.”
Earlier Wednesday, Eduardo Osuna, CEO of BBVA Mexico, and Barclay’s country chief Raul Martinez-Ostos had criticized the bill. Luis Nino, president of Mexico’s bank group ABM and the chairman of Banco Azteca, said that Mexican banks had solid anti-money laundering protocols in place and that it was not the place of ABM to reject legislative proposals.
In a separate vote Wednesday evening, the Senate also ratified the president’s nomination of Finance Ministry treasurer Galia Borja Gomez as a member of the central bank board. Former Economy Minister Graciela Marquez was also approved to the board of the national statistics agency.