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Mexico’s Finance Minister says U.S. Gov. Citigroup stake temporary

March 20 (Bloomberg) — Mexican Finance Minister Agustin Carstens said U.S. Treasury Secretary Timothy Geithner told him the government’s stake in Citigroup Inc. is temporary, a position that will help avoid conflicts with Mexican law.

Carstens said the U.S. bailout of Citigroup has helped strengthen its Mexican unit, Grupo Financiero Banamex SA, and that he thinks the U.S. will relinquish its stake in Citigroup by 2012. That forecast was seconded by Manuel Medina-Mora, the chief executive officer for Citigroup’s Latin American division.

President Felipe Calderon’s government had come under pressure from local lawmakers to force Citigroup to dispose of its Banamex unit after the U.S. Treasury agreed to take a 36 percent stake in the New York-based lender. The finance ministry yesterday said that “foreign government aid programs don’t violate Mexican law.”

“We are living through an exceptional, transitory, temporary period,” Carstens said. “The assistance of the U.S. to Citigroup is helping Banamex.”

Calderon will send a bill to Congress that seeks to maintain a restriction on foreign governments holding stakes in Mexican banks while more clearly stating the permissible exceptions during times of crisis, the finance ministry said in a statement yesterday.

Third Rescue

The U.S. government agreed on Feb. 27 to a third rescue of Citigroup, prompting Mexico’s National Banking and Securities commission to say it would study legal implications of the U.S. government’s stake. Citigroup bought Banamex, Mexico’s second- largest bank, for $12.5 billion in 2001.

The new proposed legislation “would establish with total clarity the exceptions strictly necessary to face crises such as those that present themselves today,” the ministry said.

The proposal would specify that banks, after three years of operating under the exemption to allow foreign government stakes, would have to sell 25 percent of their Mexican unit’s shares on the local market. That requirement would rise to 50 percent of shares after six years.

Carstens also said he wants to see the peso strengthen beyond a 14 peso per dollar exchange rate. The Mexican currency rose 0.8 percent to 14.1318 pesos per dollar at 11:30 a.m. New York time.

Source: Bloomberg, 20.03.2009  Bill Faries  wfaries@bloomberg.net; Valerie Rota  vrota1@bloomberg.net in Acapulco, Mexico

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