Pieces of Silver

Catching a mountain lion in a coyote trap is quite a surprise. Finance Minister Ramon Beteta last week found how it feels. He had set out to run down the silver smugglers who had been cheating the government of export taxes and dollar earnings. He ended up with the ultra-conservative Banco de Comercio, S.A., the country's biggest private banking house, on his hands.

Mexican silver production is strictly regulated by the government, which imposes a 15% tax on exports to support the value of silver in the Manhattan free market.* For more than a year Mexican treasury officials had suspected a big leak in silver shipments. Despite controls, there always seemed to be enough high-grade Mexican silver in Manhattan to cause prices to fluctuate between 70 and 77.5 cents an ounce. Earlier this year, Beteta put some of his best investigators on the problem.

Across the Border. Three months ago, with the investigation beginning to simmer, Beteta had a visit from Anibal de Iturbide, manager of the Banco de Comercio. Without his knowledge, Iturbide said, his chief of exchange had been enriching the bank by illegal silver sales.

Following up this lead, Beteta's agents traced some 80 sales totaling more than 9,000,000 silver pesos, with an estimated profit of more than $1,000,000. All the silver had been turned over to a notorious smuggler named Roberto Maese, who moved it across the border to El Paso. Each deal had at least two profitable angles: 1) it evaded the export tax; 2) the bank sent out old-style silver pesos, whose metal value is now higher than the face value, and replaced them in its own accounts with paper money.

Run on the Bank. Maese was arrested (and released on bail). At the customhouse in Ciudad Juarez, 62 inspectors were fired, 25 other officials suspended, and 76 employees either fined or transferred. The Banco de Comercio was fined 200,000 pesos ($23,121).

When the smuggling story broke in Mexico City, Beteta was unexpectedly faced with the possibility of a financial panic, touched off by a run on the Banco de Comercio. Said the pro-Communist El Popular: "Every patriotic depositor should withdraw all funds at once." Beteta' asked editors and financial writers to go easy on the bank.

At week's end the threat of a bank run appeared to be ended, but Mexican bankers and politicos had not heard the last of smuggled silver. Congressmen were ready to take the matter up this week.

*Newly mined U.S silver does not enter the free market. The U.S. Mint buys it at a subsidy price of 90.5-c- an ounce.

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