A former secretary of Mexico's Treasury who once headed its central bank has warned the financial community against letting foreign banks into the country.

Outside ownership "could turn out to be a grave historical mistake," Jesus Silva Herzog said in a speech this week at Tecnobanca, a conference sponsored by InfoBanca, a Latin American publishing company, and American Banker.

His comments came in the wake of the federal takeover last week of Groupofinanciero Serfin, the country's third-largest banking company. The government is seeking outside investors to help prop up the bank.

Fallout from Serfin is feeding resentment against foreign investment. HSBC Group of London, with a 19.9% stake in Serfin, has a guarantee to get $150 million of its investment back in three years, while national investors have lost all their money.

Mr. Silva Herzog, who is a candidate for mayor of Mexico City, viewed as the second most powerful elected post in the country, said Mexican banks need time to "integrate into" a vibrant national economy. With 4.8% growth last year, Mexico outdid most other economies of the world, he said.

The banks, however, are still struggling to overcome a 1994 privatization effort that went awry when many banks were sold for as much as twice what they were worth, he said.

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