Profile - Banrural, Guatemala
What is Banrural? Banco de Desarrollo Rural SA, (Banrural) is a joint-venture (estructura mixta) bank in which the state is the main shareholder. Guatemala's second largest bank after Banco Industrial, Banrural was created in 1997 with the aim of promoting rural development and was unusual in its declared dual objective of generating profit while fulfilling a social mission. Colom recently described the bank as the “financial arm" of the government.
Why watch it? Banrural is at the heart of the recent Rosenberg scandal which has shaken the country: in a posthumous video released on 11 May 2009, murdered lawyer Roberto Rosenberg accuses Banrural's general manager, Fernando Peña and its president, José Ángel López (along with President Alvaro Colom; private secretary to the presidency, Gustavo Alejos; and other closes aides) of orchestrating not only his killing (which occurred the previous day) but those of his client, businessman Khalil Musa and Musa's daughter. The Musas were murdered on 14 April.
Rosenberg said that Alejos initially offered Musa a position on the Banrural board of directors but both Peña and López opposed the appointment and ultimately Musa was killed for his refusal to take up a post which would require him to cover-up “daily acts of corruption". These, Rosenberg said, ranged from “money laundering to the transfer of public funds to non-existent programmes organised by Sandra de Colom as well as financing fake companies used by drug-traffickers". Colom and the Banrural directors categorically deny the claims arguing that the video is a plot to bring down the government by the business elite, angered over Colom's efforts to introduce social reform - of which the bank with its declared social aspect would appear a key component.
Date of birth: 31 July 1997.
Public life: Banrural came into being in 1997 with the publication of law 57-97 on 31 July which transformed the state-run Banco Nacional de Desarrollo Agrícola (Bandesa) into a financial institution, capitalised not only by the State but also by civil society groups and also former bank employees. Its main objective was to “promote the economic and social development of rural areas through the stimulus and facilitation of savings, credit services and other financial services to credit unions, NGOs, Guatemalan autochthonous associations (Mayan, Garífunas, and small size farmers associations); micro, small and medium size entrepreneurs, both directly or indirectly through other legally recognised institutions".
Banrural soon became one of the most successful banks in the country. Its credit portfolio sky-rocketed from US$65m in 1998 to US$660.7m in 2005 while over the same period, profits expanded from US$2.2m to US$25.6m. Along with Agromercantil and Reformador, Banrural was one of three banks to take over the liquidation process of the country's fourth largest bank, Bancafé, in October 2006 after the bank collapsed, following the Refco scandal. In December 2008 Banrural had 568 branches across the country, second only to G&T Continental's 601. According to the latest press release posted on its website (prior to the scandal breaking), Banrural's assets are worth US$3bn; its credit portfolio, US$2bn; and its liabilities, US$2.5bn.
Timeline:
31 July 1997: Publication of law 57-97 establishing Banrural.
1 January 1998: Banrural begins operations.
October 2006: Takes over Bancafé's assets (along with the banks, Agromercantil and Reformador) after Bancafé's collapse.
March 2007: Acquires insurance company Seguros del País (Sepasa).
September 2007: Acquires finance company Financiera del País (Fipasa).
December 2007: Becomes a financial group.
11 May 2009: Release of Rosenberg's video in which he accuses Banrural's directors, President Colom, and other senior figures of murder, as well as making a host of allegations involving the bank.
Strengths: Banrural's success has owed in part to its professed aim of “generating a fair profitability_without neglecting its social mission", at the same time as targeting the rural sector. This distinguishes it from other banks in the country. The involvement of the government has also contributed to the bank's financial stability, such that in December 2007, the national monetary board approved Banrural's request to become a financial group (following the acquisition of insurance company, Sepasa and finance company, Fipasa). In a further nod to the bank's management, López was made president of the Guatemalan banking association (ABG) for the period 2008-2009. Banrural also has a sizeable chunk of the remittance market, a key sector in Guatemala (accounting for 9.6% of GDP in 2008); a September 2008 report by the international organisation for migration (OIM) showed that Banrural controls 75% of remittances which pass through the banking system.
Weaknesses: The corruption allegations
involving the bank are nothing new; the links between the bank and the
government have long attracted criticism, particularly in relation to the social
programs of First Lady, Sandra Torres de Colom, also named by Rosenberg in his
video as complicit in the plot. Torres heads the social cohesion fund (CSS) a
political entity created by Colom to coordinate government activities focused on
poverty reduction, which disburses funds through Banrural. The lack of
regulation of funds earmarked for the CSS attracted considerable criticism
during the process of approving the 2009 budget.
In July
2008, the indigenous and peasant committee, Coordinadora Nacional Indígena y
Campesina (Conic) demanded that the government stop channelling its funds for
social programs through Banrural after it emerged that the bank had failed to
disburse more than US$12m in loans for small farmers, authorised by the
agriculture ministry.
As regards the current scandal, while the
government and the bank reject Rosenberg's allegations, there are nevertheless
aspects of his story which would appear to be true and thus arouse suspicion;
for example national daily 'Prensa Libre' published documents which included a
letter from presidential secretary Gustavo Alejos to López dated 5 January 2009
requesting that Musa be appointed a director of Banrural, as well as a letter
sent less than a month later to the economy minister proposing an alternative
candidate. The newspaper published correspondence between Musa and Gerardo de
León, another figure implicated by Rosenberg, revealing the strained relations
between Musa and the Banrural directors; Musa questions why the offer of the
Banrural position (which he had not even requested) should have provoked such an
uproar. The government and Banrural directors have yet to shed any light on
this.
Prospects: With Guatemala yet to fully recover from the instability incurred by the banking crisis which took place less than three years ago, in which two banks, Bancafé and Banco de Comercio went bust, smear campaigns have an added potency and Rosenberg's allegations have already had a negative effect on Banrural. Banking superintendent Edgar Barquín said that in less than 48 hours after Rosenberg's murder, some US$62.5m were withdrawn from the bank. Colom told the international press on 21 May that this figure was closer to US$125m, although assured reporters that the crisis was in hand. Both Barquín and the president of Guatemala's central bank (Banguat), María Antonieta de Bonilla, stressed that there were no plans to suspend Banrural's operations.
Ultimately the bank's future and credibility, inexorably bound up with that of Colom, hinges on the investigation into Rosenberg's incendiary accusations. Given the rampant impunity afflicting the country (with 98% of crimes unsolved), and few promising signs so far glimpsed in the investigation, led by UN-backed International Commission against Impunity in Guatemala (Cicig), a speedy resolution is unlikely.
The powerful private sector organisation Cacif has also demanded that an “independent, international company" carry out an audit of Banrural - a demand which implicitly raises doubts over the capacity of the banking superintendence and attorney general's office to carry out its job.