The New Economic Nationalism Clashes with the Old

Some in Mexico are up in arms about the US government's ownership of 36 percent of Citigroup, which is the parent company of Banamex. The problem is that Mexican law prohibits foreign government participation in a Mexican banking institution. The Finance Secretariat released a statement saying that the government's takeover of the Citigroup shares doesn't represent a "deliberate intention to participate in the banking industry and much less to intervene in the Mexican financial system." I expect that despite (or because of) this finding, the complaints will continue for a couple of days, with some of the more extreme and out-of-date commentaries painting Calderón as a lapdog of empire (this was one of the issues that provoked Gamboa to tell Calderón to be a man) before quietly dying away.

The arguments against Citigroup and Calderón are flawed. First of all, it's unclear what the recourse would be were the government to find that the US shares of Citigroup were in violation of Mexican law. Would they force Citigroup to sell off Banamex? That seems extreme, but how else could they enforce it? Second, a strict intepretation of the prohibition is a bad fit for the financial reality of the crisis and post-crisis era. Governments are going to have a much more direct role in financial institutions for the indefinite future. If the worry is that foreign governments will use the banks to harm Mexican interests (which seems like an antiquated worry; it's unclear why the governments would be more likely to do so than the banks operating without government involvement), then Mexico would be much better off keeping an eye on the governments with an ownership stake in the many foreign banks operating on national soil rather than trying to impose a prohibition on them.