“They’re trying to evade taxes with the Banamex-Citigroup Deal”

-- Mexico City Governor Andres Manuel Lopez Obrador

Translated from the Mexico News Service (Notimex)

Mexico, May 25 (Notimex): In a letter sent to President Vicente Fox,
governor of the capital Andres Manuel Lopez Obrador said today that he has
information that through a maneuver, at the highest levels, the deal between
Banamex and Citibank for $12.5 billion dollars that will stay totally free
of taxes.

At a City Hall press conference, Lopez Obrador said that this manuveur can
only happen if the Secretary of Treasury authorizes Citibank to enter the
Mexican Stock Market before making its payment to Banamex.

In the opinion of Lopez Obrador, this maneuver would mean that a large
income of $12.5 billion dollars will stay totally free of Rental Taxes that
currently are charged at a rate of 40 percent.

”That would be a true trick against the nation,” said Lopez Obrador, taking
into account that the profits of the Banamex stockholders will be $7.5
billion dollars, not counting the price that they paid to buy that bank.

If taxes were applied according to the current rates, the payments to the
public budget would be 3 billion dollars, said Lopez Obrador in his letter
to Fox, signaling that this evasion of taxes would constitute “one fourth of
the income that you think can be obtained in your fiscal reform, and, in
particular in the collection of sales taxes on foods and medicines.”

That’s why, said Lopez Obrador in his letter to Fox, “I believe your
intervention to achieve these goals ought to be… to seek a structural
solution at the root of the problem that the high cost of the bank rescue to
us, specifically the high dividend rates (on government bonds).
For that, he proposes once more “to convene the Truth Commission, whose
principal task would be to revise, once and for all, the files of
Fobaproa-IPAB”

The second goal would be to condition the authorization of the Banamex deal
with Citibank to wait until the Treasury Secretary clarifies which category
of taxes apply in this sale, duly informing the Congress of the Union and
the Public.

In the document, the chief of the capital government recalled that when
Citibank acquired Confia bank, it included a dividend of 2.85 million
dollars, reflecting an interest rate (on treasury bonds) above 3.5 percent.

Now, he said, this same U.S. financial institution intends to acquire
Banamex, and with that will receive similar dividends of $3.5 million
dollars at interest rates equally onerous to the public treasury.

Lopez Obrador stressed that to authorize the sale of Banamex to Citibank,
“this institution would receive from the public budget, in interest rates
alone, 490 million dollars per year.”

By contrast, he noted that if Citibank invested the same amount in Treasury
Bonds of the United States it would only obtain 230 million dollars, that is
to say, less than half.

During the question and answer session, Lopez Obrador said that he hopes to
have a prompt response from President Fox, that as governor of Mexico City
he has the right to express his concern, if it is taken into account that
the Federal District will be affected to the tune of 3 billion dollars.

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