March 20, 2015 by Bill Johnson
MALINALCO, Mexico—New details about the controversial sale of a house to Finance Minister Luis Videgaray show the seller—a prominent government contractor—didn’t make a profit on the transaction, undermining Mr. Videgaray’s suggestion that the deal was done solely out of commercial interest.
Public property records reviewed by The Wall Street Journal show that Juan Armando Hinojosa, the man at the center of influence-peddling allegations roiling the administration of President Enrique Peña Nieto, sold the property to Mr. Videgaray in October 2012 at the same price that Mr. Hinojosa’s small real-estate firm bought it 10 months earlier.
Government data show consumer prices rose 3.5% in the time between the two sales. Between the fourth quarters of 2011 and 2012, real-estate prices in the State of Mexico, where the house is located, also rose an average 3.5%
The sale of the house in an exclusive golf resort outside this colonial town put Mr. Videgaray on the defensive. Although he hasn’t been accused of an illegal act, this and other property deals have fueled a scandal over alleged influence peddling and exposed the extensive links between politicians and businessmen from his home state.
Mr. Videgaray has denied allegations of impropriety. In a written response to questions from The Wall Street Journal, he said the property purchase was conducted at market value, “both in terms of the amount paid and the rate of interest.”
Companies owned by Mr. Hinojosa have won hundreds of millions of dollars in public-works projects during Mr. Peña Nieto’s time as president and as governor of the State of Mexico from 2005 to 2011. Mr. Videgaray served as the finance chief of the state from 2005 to 2009.
The purchase was unusual in that Mr. Videgaray took a mortgage with Mr. Hinojosa’s small real-estate firm rather than a financial institution, borrowing some $532,000. Mr. Videgaray disclosed last month that the mortgage had an interest rate of 5.31%, below the average rate of more than 12% that local banks offered in 2012, according to central bank data.
Mr. Videgaray defended the interest rate he paid, saying it was higher compared with fixed-income returns in the market. The interest rate was “with a private lender that does not face banking costs of capital linked to capital requirements, regulatory burdens and the like,” he said.
For financial reasons, he said that he paid off the mortgage in full 15 months later.
“While I understand that some may have concerns regarding this transaction, I reiterate that no conflicts of interest exist,” Mr. Videgaray added.
Influence-peddling allegations surfaced in November, when a team of local investigative journalists revealed that another firm owned by Mr. Hinojosa built and held the title to the presidential family mansion in Mexico City. The president´s office has denied any wrongdoing. The president’s wife, Angélica Rivera, said that she was buying the house from Mr. Hinojosa in installments with money from her career as a soap opera actress.
Mr. Hinojosa, 59, declined to comment about both deals, and hasn’t made any public remarks on the matters.