Anonymous
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ING's troubles could hurt Mexican investment
http://news.ft.com/servlet/ContentServer?pagename=FT.com/Sto...
By John Authers
September 7 2003
When Hurricane Juliette hit the southern tip of the Baja California peninsula in September 2001, it dumped more rain in one day than the arid area had
received in the previous 11 years.
It had a catastrophic effect on Grupo Fertinal's huge phosphate mine at San Juan de la Costa.
The largest mine of its kind in Latin America was flooded and its equipment destroyed along with the dock from which tankers transported phosphates
down Mexico's Pacific coast to the giant chemical plant at the port of Lazaro Card##as, where they were turned into fertilisers. From there, they were
exported to more than 40 countries, and to 300 warehouses in Mexico.
Fertinal, which employs 4,000, no longer has any stock in any warehouses in Mexico, and it has not paid its main creditor since February 2002.
But the fall-out from the disaster could yet be even worse for ING, the Dutch-based financial services group that took control of Fertinal's insurer,
Comercial America, a few months before Hurricane Juliette. And it could yet inflict severe damage on Mexico's reputation as a safe jurisdiction for
foreign investors. Fertinal says damage increases every week that its mine remains inactive and it now plans a new claim against ING including all
collateral damage, for more than $900m.
In late August, the dispute between ING Comercial America and Fertinal came to a head when a district judge in the central Mexican state of Morelos
issued arrest warrants for 21 people, including 13 ING employees, and issued an order freezing the company's accounts up to a value of $300m.
In what appears to have been an administrative mistake, all of ING's 19 accounts in the country were frozen for about 24 hours, forcing the company to
arrange a $50m line of credit from outside the country.
Meanwhile, ING has moved its 13 charged employees to a "safe location" - believed to be outside the country.
ING also embarked on an aggressive public relations policy, attacking the Mexican political and judicial systems and calling on Mexican politicians to
intervene against what they call baseless criminal charges. Fred Hubbell, head of ING's Americas division, told the FT that the events were "outside
all international banking standards" and warned foreign investors to reconsider how risky their investments in Mexico were.
Such comments are deeply unwelcome for the Mexican government. ING is one of the biggest foreign investors in the country and Mexico's largest insurer
with more than 20 per cent of the market.
But Fabio Covarrubias, Fertinal's chief executive, is also angry, and complains of political intervention by ING. "You can say you don't want to
invest in a country like ours," he told the FT. "But first you have to show that you are clean."
He added that ING executives risked turning themselves into criminal accomplices if they continued to hide their employees.
After the hurricane hit, Fertinal asked for an advance of $10m to cover the initial stages of the recovery operation. ING says that it was ready to do
so, when Bank of America, one of Fertinal's main creditors, claimed a stake in the pay-out. With further creditors showing up with endorsements, ING
says it decided not to pay until the situation could be clarified.
Then a loss adjuster - chosen by Fertinal from a list of adjusters provided by ING - estimated the total damage at $13m. Fertinal rejected the offer
and points out that four of its main creditors said the same thing in depositions to the court. It hired a separate firm of loss adjusters, who valued
its claim at $85m.
The claim was ready to move to arbitration when Fertinal persuaded prosecutors in Baja California Sur to probe allegations of fraud, converting a
civil disagreement over an insurance claim into a criminal case.
ING has pointed out that Fertinal had brought similar charges in the states of Baja California Sur and Michoacan, before going to the court in
Morelos.
"I don't think any judge can be incompetent enough to believe that story," said Yves Brouillete, chief executive and general manager of ING Latin
America.
He described the situation as "pure blackmail". He said that even if such a fraud had taken place, "that would have been a fraud against us [ING]". He
said it would not have affected the insurance contract with Fertinal.
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Stephanie Jackter
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Interesting Article
Lots of talk of money and all the Nanny -Nanny- Boo- Boos of big business, but not one word given to the fact that 300 families lost their livelihoods
and had to literally abandon their homes and their community because of this whole mess, giving up everything to move to other places and try to make
a new start.
They just don't count to either ING or to Fertinal or to the Mexican government.
I went to San Juan de la Costa a couple of months ago expecting to see the bustling little town that had been there before Juliette. What a horror to
find that it has joined the list of eerie abandoned ghost towns. The windows of the houses still taped with x's in preparation for the hurricane,
signs advertising paletas and tortillas, and half dead plants scattered in with the fully dead ones. The place is enough to sadden the heart of
anyone.
Betcha those workers didn't get one penny of severence or a days notice of their fate. But it's the phosphate production and the business climate in
Mexico that are the real important issues here. The human cost means nothing. - Stephanie
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Dave
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A general comment:
ALL corporate entities doing business in Mexico are "set up" to fail. Mexico's labor law necessitates and corporate law permits it. When future
compensation benefits overwhelm profit potential the company packs up shop and moves or restructures.
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Braulio
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Dave -
Yeah - you're right - even the banks are set up to roll-over into some other entity - even when their charter is first drawn up.
So what are you guys planning on rolling-over into? - just kidding - I wish you folks success.
Stephanie -
Maybe I missed something there but - isn't economics tied in to a community's well-being? Other than maybe the wording of the article - what exactly
is your beef? Would our shedding a tear help the situation?
Braulio.l
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TMW
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I don't know where the author of this story got his facts, but I was in San Juan De La Costa in June and there was no activity of any mining. The
conveyor system for loading the ships was shut down and in disrepair and no one was around.
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Anonymous
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| Quote: | Originally posted by TW
I don't know where the author of this story got his facts, but I was in San Juan De La Costa in June and there was no activity of any mining. The
conveyor system for loading the ships was shut down and in disrepair and no one was around. |
The article
refers to Hurricane Juliette in 2001, not Ignacio which just passed through.
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Family Guy
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"Nanny nanny boo boo"
That must be some technical mumbo jumbo I missed in Econ 101.
nobody likes to see people lose their livelihood--even here in the good 'ol US of A.
But the issue I think is the bigger picture. How do you attract foreign investment without selling off the farm?
Tighten up your labor laws and you lose your competitive advantage. Globalization ain't pretty, but are there really other choices any more? 
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