Recent trends in the evolution of Mexican financial groups

The collapse of the peso in late 1994 shocked the world financial community and severely tarnished Mexico's image as a “model” developing country. This event, however, would not have been so surprising if, in the post-NAFTA euphoria, greater attention had been given to substantive deficiencies in Mexico's commercial environment which contradicted the form of its modernization programs. An example of this phenomenon may be found in the 1990 promulgation of the Law to Regulate Financial Groups . The official purpose of the law was to foment the formation of large conglomerations of financial services firms, similar to the universal banks found in Germany, which could offer a variety of financial services under a common trademark and take advantage of economies of scale. The government hailed the law as a step toward enhancing the international competitiveness of Mexico's financial system. However, in substance, the law resembles two laws passed in the 1970s which preceded the 1980s financial crisis. Given this contradictory perspective, this paper examines the history and legal basis of Mexican financial groups as well as the evolution of financial groups from 1991 through 1994.