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CONGRESS APPROVES MEASURE TO REIMBURSE SOME FUNDS LOST BY DEPOSITORS DEFRAUDED BY SAVINGS SCHEME.

The Chamber of Deputies has approved legislation to restore some funds that low-income depositors lost to fraudulent credit unions. These informal credit unions, known as cajas de ahorro, are said to have defrauded depositors of billions of pesos in savings (see SourceMex, 2000-10-04).

Through the legislation, approved in mid-December, Congress proposed creating a special agency, Fideicomiso de Sociedades y Cooperativas de Ahorro y Prestamo y de Apoyo a sus Ahorradores.

The agency was allocated 2.785 billion pesos (US$295 million), much of which will be used to repay tens of thousands of retirees, homemakers, street vendors, small- business owners, and others who lost their savings in fraudulent schemes promoted by businessman Jose Cirilo Ocampo Verdugo and others in 1998 and 1999. The Congress said the agency will cease to exist after two years or after all its funds are exhausted, whichever comes first.

The owners of the informal credit unions would attract customers by offering high interest rates on deposits. Since these funds were not guaranteed or insured by the federal government, many depositors lost their money when the credit unions either failed or the owners absconded with the money, as was the case with Ocampo.

The plan would cover all depositors who lost up to 190,000 pesos (US$20,148). This would cover roughly 97.5% of those who lost money under the schemes. The remaining claimants would have to wait until a federal court auctions off Ocampo's assets to claim their funds.

The congressional bill, which passed by a vote of 447-1, created a special agency to administer the funds. PRI Deputy Enrique Aguilar said depositors would begin to receive the funds 10 days after the legislation was published in the daily federal register (Diario Oficial de la Federacion).

During debate on the legislation, some members of the center-left Partido de la Revolucion Democratica (PRD) and the Partido del Trabajo (PT) in the lower house demanded an investigation of former President Ernesto Zedillo's administration for creating the conditions that allowed the fraud to occur in the first place.

Salvador Soto, a representative of an organization formed by the defrauded depositors, also urged the Congress to investigate why former finance secretary Jose Angel Gurria Trevino and former attorney general Jorge Madrazo Cuellar failed to act more quickly against the perpetrators of the fraud even after they had information about the cases.

Deputy Herbert Taylor of the governing center-right Partido Accion Nacional (PAN) cited the need for legislation to restructure the entire system of informal credit unions.

"It is necessary to develop a new legal framework that will offer certainty, safety, and transparency to the system of popular credit and savings," said Taylor. [Note: Peso- dollar conversions in this article are based on the Interbank rate in effect on Dec. 20, reported at 9.43 pesos per US$1.00] (Sources: CNI en Linea, Associated Press, 12/19/00; El Financiero, Novedades, Reforma, The News, 12/20/00)
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Publication:SourceMex Economic News & Analysis on Mexico
Date:Dec 20, 2000
Words:490
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