Dirty deals, dirty deeds: fobaproa settlement, IMSS reform don't come dirt cheap.

The Fox administration finally got two deals done after four years of trying. Sadly, both are of questionable utility and even more questionable morals, but that's life in the tropics.

First, the finance secretary wants to persuade us it got a bargain from the banks, getting them to

Then Congress passed a law (hallelujah!) reducing pension benefits for new hires at the Mexican Social Security Institute (IMSS), getting the Institutional Revolutionary Party (PRI) to back a reform for once.

Let's take the banks first. Next year, some of the government bonds given to the banks in the rescue were set to mature and it looked likely Congress would refuse to let the government pay, setting the stage for all kinds of financial chaos. Our strictly orthodox finance secretary can accept anything but the threat of chaos, which makes officials sweat even in their lightweight Armani suits.

The bankers also had an incentive to settle as some politicians and activist groups still vainly seek to bring to light the vast amount of corruption the bailout brought with it.

Here's a refresher course for those of you who weren't in Mexico during those dark days.

Following the devaluation, all Mexican banks faced going out of business as defaults soared. To save them, the government agreed to take some non-performing loans off their hands. So the banks looked for their worst loans and gave them to the government--including many fraudulent ones.

These were loans made to the friends and families of the banks' owners, that were essentially gifts and taxpayers are now picking up the tab.

Since then, the banks--nearly all under new ownership--have fought to prevent any investigation into the debts, arguing it would contravene banking secrecy laws. In 1997, Congress ordered an audit by a Canadian named Mackey, whose report stated many of the loans were fraudulent.

I wonder how the banks would react if creditors refused to pay loans and cited privacy as an excuse not to let the banks see how much money they actually had. If you use public money, then there must be public accounting.

Oh, and I almost forgot, despite overwhelming evidence of rampant theft and various extraditions from as far away as Australia, not a single banker has spent a single day in jail.

As far as the social security reform goes, the interesting question here is why did the PRI, which has shown no interest in Mexico's economic development for the last four years, suddenly play ball?

My guess is the IMSS union's mistake was leaving the PRI umbrella and joining the independent Union Nacional de Trabajadores that also includes Telmex workers among others. But then, I'm cynical.

Like many of the reforms, this one was a no-brainer, but at least it got past the no-brains in our legislature. Studies showed the IMSS spending as much as 25 percent of its budget on pensions for retired workers within a few years--money that wouldn't go to upgrading decaying hospitals. IMSS workers, bless their little hearts, can retire as early as age 53 and immediately get 135 percent of their final salary for life!! Who'd go on working? These sweetheart deals--and there are plenty like them in the public sector--were the PRI's way of keeping control of the country with institutional bribes for select sectors.

At the risk of putting a well-worn record on the turn-table, these deals need to be overturned if Mexico is to have a chance at becoming a respectable democracy.

This was really just a start and it will probably end here given this government's past record. Despite the reform, 16-year-old workers today will be fat-cat retirees in 2041. And given life-expectancy improvements, it could be close to the end of the century before the weary taxpayer can put down this burden. Even then, retired oil, electricity and government workers of all kinds will be getting paychecks the rest of the country can't even dream of.

John Moody has spent 10 years covering Mexico for a variety of international news organizations. He now works as a freelance consultant for a variety of private companies and non-governmental organizations. He can be reached at jonjo66@mac.com.