Banking and Financial Institutions in the Development of Mexico
The past, the current vitality and the promising future of Bancomext cannot be understood without examining and giving value to the history of our financial institutions and, in particular, of development banking as one of its most significant sectors. It is precisely in that review where the bank recognizes its real reason for being and its meaning.
Por: José Antonio Meade Kuribreña



From the end of the Mexican Revolution that had begun in 1910, Mexico decided that social peace, economic growth and development had to be achieved by way of institutions. Although this still took a few years, it is clear that the institutionalization process began in the mid-twenties and acquired strength over the course of time.

The Mexican twentieth century was, without any doubt, one of development of the political, economic and social institutions that gave our country the appearance that now characterizes it. Together, all these institutions —both national and the ones we help forge at international level— represent a valuable legacy built over many years by women and men committed to the country’s development. In many cases it was or has been necessary to modernize these institutions, transform them and thus allow them to continue responding to the challenges for which they were created. An example of this is the Bank of Mexico, our central bank, founded in 1925 as a corporation and, since 1994, by constitutional mandate, an institution that enjoys full autonomy.

Within these brief lines I hope, first of all, to address the evolution of the main institutions of Mexican development banking and, secondly, share some important moments in the recent financial institutional construction that I had the privilege of observing closely.


The Mexican Development Bank


Our development bank, that is to say, the set of national credit institutions responsible for fostering growth and development in Mexico, was born in the 1920s.

The first of these institutions was the National Bank of Agricultural Credit, founded in 1926. Together with the National Bank of Ejidal Credit (1935) and the National Bank of Farming Credit (1965), it was constituted as the direct antecedent of the National Bank of Rural Credit (1975) and the current Rural Finance or National Finance for Farming, Rural, Forestry and Fishing Development responsible for funding the development of rural Mexico.

The second institution of the Mexican development bank to appear was the National Bank of Urban Mortgage and Public Works, founded in 1933, and which later became the National Bank of Public Works and Services (Banobras), responsible for funding the construction of infrastructural and equipment works.

National Financial is established in 1934 with the objective of “quickly and effectively taking charge of and carrying out the direct fulfillment of the administration of the buildings that form or are to be counted among the assets held by nationalized banks”, that is to say, to reinstate to the private economy the real estate allocated to the government and the old issuing banks, however, very soon, in 1940, the new institution became the country’s industrial development bank. With that it responded to the need for industrialization that Mexico had been experiencing since the 1930s and which would be very important after the end of World War II.

The National Bank of Foreign Trade (Bancomext), whose 80th anniversary we are celebrating, was founded in 1937 with the aim of promoting exports, stimulating the substitution of imports and the generation of currencies. It was the first development bank specializing in foreign trade in Latin America.

Ten years later, in 1947, the bank of our country’s armed forces, Banjército, is established, which has been essential in bringing banking and financial services closer to that social sector.

The National Savings Board, established in 1950, was transformed in 2002 into the National Savings and Financial Services Bank (Bansefi), thus adding to our development banking institutions. One of its primary objectives is to promote the financial inclusion of low-income people or those who live in remote populations that do not have formal financial services.

The Fund for Operation and Bank Financing for Housing of 1963 gave rise to the Federal Mortgage Society in 2001.

This is, in broad strokes, the family of the Mexican Development Bank, a family formed by institutions responsible for bringing credit to those who need it and which received a great stimulus to expand and strengthen its action in the wake of financial reform driven by the current administration.


The economic opening and recent institutional construction


In the last five lustrums, I have had the privilege of being a direct witness to significant changes in the evolution of this institutional development. In 1994, the coming into force of the North American Free Trade Agreement and the newly granted autonomy of the Bank of Mexico marked a turning point in the process of transformation of our economy, which then shifted and opened up to exchanges with the rest of the world.

The creation of the Retirement Savings System, approved during the government of President Ernesto Zedillo by the lvi Legislature, was another key moment. As President Zedillo said in 1996, it was a matter of creating “a system that stimulates personal and family savings, and that ensures decent pensions and provides long-term resources for productive investment”. Today, pension funds total about 3 trillion pesos, an amount equivalent to almost 14% of the country’s gross domestic product.

The next Legislature, the lvii, assumed with a profound sense of responsibility the strengthening of the financial system after the political and economic crisis experienced by the country in 1994-1995. It also established the deposit insurance or savings protection system that now protects the financial security of millions of Mexicans.

As the President said before the Congress of the Union, in his 1998 report, “the financial crises that have occurred recently [...] clearly show that, in the face of financial globalization, the Achilles heel of national economies lies in inadequate regulation and supervision of banking systems”. Among other objectives, he pointed out the need to “gradually and progressively streamline and make transparent the savings guarantee entrusted to banks, as this would also lead to greater efficiency and accountability in these institutions”.

In March 2000, President Zedillo pointed out that “the Institute for the Protection of Bank Savings (ipab) has a huge responsibility: [...] conclude the financial reorganization tasks that the law and its regulations confer on it”, stressing that “the enormous growth of credit in the years preceding that crisis [1994-1995] occurred in a legal framework of insufficient security for both creditors and debtors”. The ipab was created to promote such security and the current solvency of our payment system is testimony to the transcendence of that reform. The expansion of foreign participation in the Mexican financial system helped to diversify it and to elevate, via healthy competition, the quality and efficiency of the services it offers to Mexican society.

In the first part of his administration, President Vicente Fox proposed a set of tax-related reforms that were approved by the lviii Legislature and allowed the financial sector to become a growth engine again. In his view, “with the financial reforms we strengthen the operation of the entire system, significantly improving the regulatory and supervisory framework so the financial institutions perform with greater transparency and in competitive conditions”.

The lix Legislature took another momentous step in approving, in 2004, the General Law of Social Development. This regulation professionalized social policy through programs and institutions whose performance is quantifiable and subject to periodic evaluation. When enacting it, President Fox claimed that the new law “generates the conditions to strengthen the social fabric, reduce the gap between the most fortunate and those who have less and more efficiently combat extreme poverty”. The further development of the social policy has shown not only the relevance but also the opportunity of that vision.

The lx Legislature, during the first half of President Felipe Calderón’s government, approved a reform of issste that strengthened the institution’s finances and created a public pension fund administrator (afore) responsible for administering state workers’ pension funds. The then president described it as the most relevant reform in Mexico over the last 10 years and stressed that the new set of laws “ensures the financial viability of the state and guarantees the quality of services for new generations of public servants”.

The lxi Legislature approved a new legal framework to protect the environment, combat climate change and encourage the use of renewable energies. The General Law of Climate Change meant a change that placed Mexico at the forefront of promoting the development and use of cleaner energies, fewer pollutants than those derived from the use of fossil fuels, a vision reaffirmed by the energy reform that followed a few months after its enactment.

All these reforms required the participation of the main political forces represented in the Congress. This is also true for all approved economic packages since 1997, including income laws and expenditure budgets.


Reforms led by President Enrique Peña Nieto


The reforms led by President Enrique Peña Nieto and approved by the Congress during the first half of his administration (reforms in the areas of finance and tax, energy and telecommunications, labour and education, transparency and economic competition, among others) constitute the most ambitious moment in this transformation process. Because of its width and depth, this is the most important set of reforms made in Mexico in decades and the strongest foundation from which to make Mexico a peaceful country, inclusive, with quality education, prosperous and responsible in the global arena.       

The benefits of structural reforms have already begun to be noticed. Despite the complex external environment, our economy is growing, not at the desired pace but at an appropriate rate if we compare it with that of our main trading partners or other economies in Latin America and the Caribbean. Regarding employment, from December 2012 to May 2017, more than 2.7 million jobs have been created, the largest number of any comparable period in our history. And real wages have also had their greatest increase in decades.

Private banking —operating in the country since 1864, when the Bank of London and Mexico was opened— has been a core element in the construction of a solid and stable financial system. In recent years, thanks to increasing competition and the extension of the use of innovative technologies, private banking has extended credit to production activities and consumption, with lower interest rates. Its work has been instrumental in maintaining the dynamism of our internal market and thus the economic growth and development of the country.

Mexican development would be unthinkable without the support of the aforementioned banking and financial institutions and without the women and men who, over the years, have sustained and propelled them. Today we recognize the important work developed by one of them and we pay homage on its 80th anniversary: Congratulations Bancomext!


José Antonio Meade Kuribreña is Secretary of Finance and Public Credit.