November 18, 2003 Dow Jones International News Mexico: Banamex, Business Groups to Clean Out Credit Bureau Mexico City â?? In a bid to give some extra backing to Mexico's sluggish lending, local banks and top business groups agreed Tuesday to clean out the country's credit bureau and remove thousands of small companies from a long log of blacklisted debtors. Manuel Medina Mora, chief executive of Citigroup Inc.'s (C) unit Grupo Financiero Banamex, said the credit bureau will eliminate 315,000 entries from companies that defaulted on debt. According to estimates from the Bankers' Association, the reduction would make 125,000 small companies eligible for credit, Medina Mora, who's also the president of the bankers association, said at a ceremony with business and industry leaders. "The figure may reach 150,000 companies," Medina Mora added. "Most of them should be small businesses, since the number of medium-sized and big companies ranges between 20,000 and 40,000 in Mexico." Mexico has two credit bureaus, one for companies and another one for individuals. The purge will take place at the credit bureau for companies, which is operated by business-data provider Dun & Bradstreet Corp. (DNB) of Murray Hill, N.J., and consumer credit reporting agency Trans Union Corp. The credit bureau for individuals, which has 22 million files, has also purged entries from its records. The credit bureau for companies has 3 million entries, of which 315,000 are linked to defaults. Under the agreement signed by bankers and business leaders, 58% of those blacklisted will be removed under a criteria based on the date of default and the amount involved. "This breaks a paradigm, as clients that were briefly in the credit bureau because of past-due loans weren't able to get loans, discouraging the development of viable projects due to short-term problems," said Jose Luis Barraza, head of the employers confederation Coparmex. The bureaus gather creditworthiness information from banks, car dealerships, retailers, and phone companies. The credit bureaus were created in the mid-1990s after a crisis that forced hundreds of thousands of debtors to default on their loans. The bureaus and the legal framework was revamped last year amid complaints from thousands of individuals and companies that they weren't able to get loans because of inaccurate data, or listings for irrelevant amounts. Banks also agreed to describe reasons for a potential rejection of a loan application from companies. Consumer protection agency Condusef will act as arbiter in case of disagreements between banks and businesses. The move is part of a broader effort to boost lending in Mexico, where bank profitability has been squeezed by the steep fall in interest rates and increased competition. Medina Mora said in June that banks were ready to grant more than $17 billion in loans in a 12-month period. According to the latest statistics from the Bank of Mexico, 70% of companies surveyed by the central bank said they aren't getting bank loans, citing economic uncertainty, high interest rates charged by banks, and the banks' unwillingness to lend.
