Government Ownership of Banks Ends in Mexico : Finance: The last of them are sold to private investors a decade after they were nationalized.

A decade of government ownership of Mexico’s banks ended Monday when the last of the country’s 18 commercial banks was sold to private investors.

The sale clears the way for the government to grant concessions for new banks, eventually even to foreigners, under the terms of a free trade agreement now being negotiated with the United States and Canada.

Banco del Centro, a regional bank with $1.3 billion in assets, was sold for $280 million, bringing the total that the government has received for controlling interest in the banks to $13 billion.

The government still owns a significant minority interest in three of the country’s four largest banks, most notably a 22.5% stake in Bancomer, Mexico’s No. 2 bank.

Government officials contend that they have returned to the private sector stronger, healthier banks than those that former President Jose Lopez Portillo shocked the country by nationalizing in 1982.

Portillo called bankers traitors and accused them of exacerbating the foreign debt crisis, providing a conduit for capital flight.

His successors have turned to free market policies to solve the country’s economic problems, selling off and closing hundreds of state-owned corporations, from airlines to the telephone company. Just over a year ago, the banks were added to the list of companies on the auction block.

However, the banks were sold under much stricter conditions than other companies. No individual could buy more than 10% of a bank, and more than 5% only with special permission. Total foreign ownership was limited to 10% of a bank’s stock. Industrial groups could not own banks, and all investors had to be registered and approved by a government wary of drug lords becoming bankers.

Investor groups led by former bankers were allowed to bid, but no ex-banker ended up buying his family’s old bank, although some made unsuccessful offers.

Rules tended to favor bidders who wanted to form financial groups, creating a form of universal banking that puts brokerages, investment banking services, accounts receivable financing, leasing and insurance under one corporate umbrella.

For example, foreigners may own up to 30% of the stock in a financial group that owns banks, although only two financial groups have found foreign investors, both of those after they bought a bank.

All but five of the banks have been sold to financial groups. The new owners of two of those independent banks are in the process of forming groups.

Critics, notably the respected financial newspaper El Financiero, have accused the government of concentrating too much financial power in these groups.

However, the government contends that efficiently operated, integrated groups are the most likely way Mexican financial institutions can meet the coming international competition.

Finance Minister Pedro Aspe said last week that under the proposed North American free trade agreement, banking and other financial services will be opened to foreign competition. For the first time since 1938, foreign banks will be allowed to establish Mexican subsidiaries, which will be subject to Mexican banking laws on capital, reserves and other matters.

Citicorp is now the only foreign bank allowed to have more than a representative office here.