(Bloomberg) -- Mexican President Claudia Sheinbaum is supporting a proposal to reform the law regulating the government-backed mortgage lender Infonavit, that will greatly expand its capabilities, eliminating a raft of checks and balances to give her administration full power over its decision making.
Sheinbaum said the reform, approved early Saturday morning in the Senate, will protect the savings people have in the institution and will help keep housing prices from rising through the creation of a construction company run by Infonavit to buy materials such as cement or rebar for the building of government houses.
Giving Infonavit the power to build houses “will be an incentive for the growth of the construction sector at the national level,” with public and private participation to satisfy the current demand, according to the draft of the bill seen by Bloomberg News.
The proposed legislation mirrors reform initiatives undertaken by the ruling Morena party since its sweeping victory in June elections that increase the scope and role of the government in Latin America’s No. 2 economy, while reducing or eliminating regulatory oversight.
The reform was originally proposed by former President Andres Manuel Lopez Obrador, Sheinbaum’s mentor, arguing that his desire is for lower-income Mexicans to be able to buy a house easily. AMLO, as the former president is known, put government entities not traditionally involved in construction, such as the military, in charge of the building of some of his flagship projects such as the Maya train.
Expanded Powers
The bill seeks to significantly increase Infonavit’s powers, allowing it to use its resources to purchase land and build houses through a subsidiary. The plan would also allow Infonavit to offer rent-to-own options and it proposes that rent may not exceed 30% of the employee’s salary.
The bill proposes to reform several departments of the agency, such as the general assembly, the board of directors and the committees of transparency and oversight, so that the government has more representatives than the labor and business sectors, guaranteeing it the ability to make decisions with virtually no opposition.
It also says that, since Infonavit is not a bank, banking regulation, with the supervision of the banking and securities regulator CNBV, would impose restrictions on its operations and flexibility that would limit its new objectives, such as providing loans at low rates and building housing.
Vanessa Rubio-Marquez, a professor at the London School of Economics and Political Science and a former deputy finance minister in Mexico, said the housing agency bill added to a string of reforms that have strengthened the government.
She pointed to the erosion of worker and business representation on the board and the removal of oversight on Infonavit’s financial transactions by CNBV as worrisome.
“Anything that can be done to improve governance and to have more transparency, accountability, and checks and balances would be the right way to move forward,” she said. “But it’s not moving in that direction.”
The leader of the ruling party in the Lower House, Ricardo Monreal, said the reform will be discussed on the floor next year, so that in December the lawmakers can review it thoroughly and address the concerns of businesses and unions, newspaper Reforma reported.
(Updates to add Ricardo Monreal comments in 12th paragraph)
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