CIAO DATE: 06/05

Bankers into Brokers: The Structural Transformation and Opening of Mexico's Financial Markets

Abstract

Mexico's financial market opening demonstrates how this domestic logic interacts with international condition. The following case study of Mexican financial opening makes the following contentions. First, financial market opening in Mexico did not begin in the 1980s, as commonly believed. Rather the process has its roots in a conflict among sub-sectors of the financial services industry, between powerful oligarchic bankers (banqueros) and financial entrepreneurs based on the bolsa (bolseros). The conflict, dating from the 1960s, was a purely domestic affair and was not the result of increased international capital mobility and financial marked opening in OECD countries. Nevertheless, this conflict led to a structural change in the financial service industry congruent with changes in the international financial system from bank-based financing to increasing securities market-based financing.

The major argument in this case study is that international pressures for financial market opening did not determine structural transformation in the financial services industry in Mexico. However, the new structural realities in the financial sector and international pressures were complementary with changes occurring in the international economy, specifically the increase in international capital mobility. Because the structural transformation in Mexico's closed financial system is essential in this argument, this case study takes a historical approach toward understanding the changes within the sector. The first section details the rise of a new breed of Bolsa-based entrepreneurs and their cultivation of influential supporters in the Finance Ministry (Hacienda). The next section examines international pressures, economic conditionals, and domestic politics and specifies when and how they influenced timing pace, and style decisions on financial market opening during the Salinas presidency.

Full Text (PDF, 62 pages, 4.48 MB)