A recurring nightmare

Almost 28 years to the day that the original Rumasa conglomerate was expropriated by the Spanish state, businessman José María Ruiz-Mateos looks set to provoke another crisis- one that would see some 5,000 people lose their life savings, as well as a further 10,000 employed in Rumasa's 117 companies lose their jobs.

In short, Ruiz-Mateos has managed Nueva Rumasa exactly as he did its predecessor: by issuing bonds without the funds to back them up; by moving money around from one company to another; and the classic trick of using increases of capital to pay loans or earlier increases. The result is that the group's 10 largest companies have sought bankruptcy protection; investors who thought they were going to get eight-percent rates of return are now looking at losing their shirts; employees say that they haven't been paid; and Ruiz-Mateos himself has reverted to his old antics of blaming everybody else for his misfortunes, notably the banks, the government, and the media.

There is something of a chronicle of a death foretold about all this. Investors were warned by the government and the stock exchange's watchdog, the CNMV (seven times in all) about the dangers of investing in Nueva Rumasa, bearing in mind what had happened nearly three decades ago. It is still unclear to what extent Spain's banks and savings banks are exposed to Nueva Rumasa. It would also be interesting to know the credit ratings awarded to Ruiz-Mateos' latest ventures. It would be disheartening in the least to learn that while small companies were being denied loans of as little as 50,000 euros, Ruiz-Mateos was able to gain access to preferential lines of credit.

The expropriation of Rumasa in 1983 under the then-newly elected government of the Socialist Party's Felipe González reflected a desire to rid the financial system of practices that were damaging to both investors and savers. Nueva Rumasa is proof that almost three decades later- and with cases such as Gescartera or the Afinsa Ponzi scheme having cropped up along the way- that such practices are far from having been eradicated.

To bring an end to such behavior, what is surely called for is the setting up of an agency to look out for the interests of financial services customers. That said, anybody considering investing in a company should at least take the advice of the CNMV. That is the first test of financial intelligence, and one that clearly many people in this country still have to learn.