The bank accounts of the city of Mérida, Yucatán, could be blocked on Wednesday due to the municipal government’s failure to pay a 10-year-old debt owed to the bank Santander.

A Yucatán court has set a deadline of 5:00 p.m. Wednesday for the city to pay the 588.8-million-peso (US $28.9 million) debt or reach a repayment agreement with the bank. If it fails to do so, an embargo will be placed on its bank accounts and assets.

The newspaper Milenio reported that municipal authorities and Santander have made approaches to each other to discuss the situation but as of early Wednesday no resolution had been reached. However, there is optimism an agreement will be forthcoming.

“… Our team in the region is seeking to approach the mayor’s office with a view to not having the embargo imposed. We’re confident that reaching an agreement will be possible,” Santander told Milenio.

The bank said it is offering solutions that will avoid an adverse impact on the municipality, its activities, its employees and residents of Mérida.

“We have viable proposals to help that we’re putting within the reach of the municipal authority,” Santander said.

The debt dates back to March 2011 when the municipal government signed a contract for street lighting with AB & C Leasing that was financed by Santander.

When the municipal government changed later in 2011, authorities notified the bank that it wouldn’t make repayments to the loan, arguing that there were irregularities with it.

The government launched legal action aimed at extricating itself from responsibility to pay back the loan but in 2014 a Mexico City judge ordered it must do so, ruling that the contract and the previous administration’s transfer of responsibility for it to Santander were legal.

During a period of several years, the Mérida council continued to wage a legal battle against its responsibility to service the loan but had no success. Late last month, a Mexico City court once again ruled that it must repay the loan, paving the way for the Yucatán court to set today’s deadline.

With reports from Milenio