Banks, Banking and Credit in Mexico

Mexico’s banks were re-privatized in 1991-2, after they had been nationalized by President Jose Lopez Portillo following Mexico’s 1982 financial crisis.  Although the banks were re-privatized by 1992, it was not until 1998 that the banking system was fully opened up to foreign investment.

By 2002, over eighty per cent of Mexico’s banking system was acquired by foreign financial institutions.  Banorte is the only major bank still wholly-owned by Mexican shareholders.

Mexico’s other principal banks: Banamex, Bital, Bancomer and Inverlat have been bought out by American, British, Spanish, and Canadian banks respectively.   Most kept their names with the notable exception of Bital, which was completely re-branded in a high-profile switch-over to HSBC.

Opening the Mexican banking sector to foreign ownership delivered a number of key benefits, the principal one being that the banks were able to re-capitalize following the 1994 financial crisis. Other benefits included the establishment of a stable banking environment, backed by experience brought in by foreign banks and the implementation of new technologies and more robust banking practices.

Mexico’s commercial banks also created, and collectively own, Mexico’s sole credit agency. El Buro de Credito (often referred to as just ‘El Buro’) has enabled the banks to share information, price credit risk and develop credit markets, especially in the consumer and small business sectors. The availability of consumer credit on a mass-scale is a relatively new occurrence in Mexico; its availability is a direct result of the changes made to Mexico’s banking system from the late 90’s, including the formalization of this central credit agency.

Mexico’s banks offer a range of financial services including current (checking) accounts, deposit accounts, credit cards, personal loans (loans for new cars are especially prevalent), a plethora of insurance services, and AFOREs – tax-efficient saving investment funds.

All of Mexico’s principal banks offer internet banking for their clients.  Paying bills and transferring money between accounts electronically saves having to join the lines at the bank, which are especially long on pay-day quincenas (every 15 days).

Despite new ownership, Mexico’s retail banks continue to be characterized by old nuisances: long lines at branches, bureaucracy, high charges and commissions, low interest on deposits, high interest on credit cards (annual interest rates of 50% on credit cards are not uncommon here) and customer service, which although has improved in recent years, still needs attention.

Last week Mexico’s President, Felipe Calderon, acknowledged that key industries in Mexico needed a shake-up and announced a program to tackle the lack of real competition in the telecommunications and banking sectors, citing that these needed ‘more effective competition’ in order to help Mexico reach its ambitious economic growth targets and create the many new jobs its relatively young population needs.  Time will tell how that policy manifests itself in the marketplace.

Also See: Guide to Banks, Banking and Credit in Mexico and Guide to Money in Mexico.