Economic contingency
Introduction
The Bank Savings Protection Fund (Fobaproa, by its acronym) was a contingency fund created in 1990 by the government of Mexico and exercised in 1995 in order to prevent the worsening of the economic crisis in Mexico in 1994. The exercise of the fund converted a debt of 12 private Mexican banks for 552 billion pesos—approximately $100 billion in interest accumulated—in public debt in order to save the savings of Mexicans.[1].
The exercise of the fund was proposed by then-president Ernesto Zedillo Ponce de León and approved by the legislative majority of the Institutional Revolutionary Party (PRI) and the National Action Party (PAN), with the opposition of the Party of the Democratic Revolution (PRD)[1] after strong debates in the chambers.
Following recommendations from the Inter-American Development Bank (IDB) and taking experiences such as that of Chile in the 1980s,[2] in 1990, Fobaproa was created with a history of successive economic crises that, among other effects, led to a lack of liquidity in the banking system. In the face of possible financial crises that led to the insolvency of the banks due to the debtors' non-compliance with the banks and the massive withdrawal of deposits, it was expected that Fobaproa would assume the overdue portfolios and capitalize the financial institutions.
During the economic crisis in Mexico in 1994 and the following years, Fobaproa, its conception, implementation and main beneficiaries became one of the most controversial issues in Mexican politics, due to long-term state debt and the fact that among the beneficiary savers were close to the country's political leadership and are linked to corruption controversies.[2] 55% of the debt covered by the fund was destined for prominent businessmen and bankers, who left. of the crisis amassing great fortunes. The most important controversies that occurred around Fobaproa occurred when figures from the business leaders entered debts from their businesses into the overdue portfolio that the government rescued so that it could be liquidated[3] including simulations of credits that were destined to finance political campaigns of the PRI[4] and that were included as insolvent for the fund.[5] After the accusations made by the PRD, legislators from the PRI and the PAN promoted the performance of an audit that acquired the name Mackey Report") because it was carried out by the Canadian auditor Michael W. Mackey, who did not conclude his activity properly since the banks involved claimed banking secrecy to not provide information.[6].