Mexican banks tighten lending to states as graft concerns surface

lunes 1 de agosto de 2016 16:03 GYT

By Noe Torres and Dave Graham

MEXICO CITY Aug 1 (Reuters) - Mexican banks, determined to avoid a return to past woes, are reining in lending to the country's indebted state governments, some of whose leaders have recently become the focus of corruption allegations.

The drop in bank lending to the states this year has been the sharpest since the 2007-2009 financial crisis, and coincides with a jump in liabilities in several states in the past five years.

In the first half of 2016, commercial banks agreed 11 loans to local and state governments worth 8.471 billion pesos ($451 million), less than half the sum from the same period in 2015, when 32 loans went out, according to finance ministry figures.

This year's decline was the steepest since 2009, when the financial crisis pushed Mexico into recession, the data show.

Four states - Veracruz, Quintana Roo, Nuevo Leon and Chihuahua - accounted for close to half of the 70 percent jump in local government liabilities between 2010 and 2015, which stood at 536 billion pesos ($28.52 billion) at the end of December.

"We now have more cautious policies to avoid cases of over-indebtedness," said Armando Acevedo, the executive in charge of local lending at Grupo Financiero Interacciones, a major lender to states and municipalities.

In June, Moody's downgraded GFI's ratings, citing "rising asset risks deriving from the bank's large exposures to Mexican regional and local governments."

And over the next six weeks, Moody's did the same to Veracruz and Chihuahua, while Quintana Roo, home to tourist hub Cancun, had its outlook lowered by Standard & Poor's.   Continuación...