Development banks, essential for post-Covid recovery
Amidst a complex international scenario, Mexico faces the double challenge of driving solid recovery and at the same time, adopt a more dynamic, social, and environmentally sustainable economic model. For this, it requires a developing State that mobilizes the whole of society in the same direction, and development banking that supports this great transformation. What is the role of Bancomext and Nacional Financiera in this national crusade? Here is Francisco Suárez Dávila’s take on it.
Por: Francisco Suárez Dávila - Was a representative of Mexico at the OECD, Undersecretary of Finance, and Director of Banco Obrero and Banco Mexicano Somex.

Mexico must transform its current economic strategy to face the great pandemic depression, promote a speedy and firm recovery, and initiate a stage of sustained growth. For this, it needs an active developing State that promotes growth and mobilizes the entire society in the same direction. A State capable of activating the necessary instruments, now dormant. We have achieved this in the past and other countries have done or are about to do so. A first basic instrument is to significantly increase both public and private investment.

At sector and region levels, trade and industrial policies are important and complementary since the latter does not generate growth without the former. Both must be supported by a financing policy; otherwise, everything will just be good intentions. Development banks must play a fundamental role within this financial policy: Nacional Financiera as the ideal support for industrial policy and Bancomext for trade policy.

I will refer to some valuable experiences in which development banks have supported successful growth strategies in Mexico and other countries; then, I will address the current situation of Mexican development banks, and finally I will present the fundamentals of a new development bank that will support a virtuous recovery that modernizes the country’s economy.




Development banking has been a very effective economic policy instrument, as evidenced by various episodes in the history of Mexico. This experience is not nostalgia, it is valid and relevant today.

Development banking came about in the 1920s, at the same time as Banco de México. One of the founders of the central institute, the prominent conservative Gómez Morín, also promoted the creation, in 1926, of the country’s first development bank, Banco de Crédito Agrícola and, seven years later, the constitution of Banobras. During Lázaro Cárdenas’ administration and under Minister of Finance Eduardo Suárez, Nacional Financiera was transformed to start the industrialization process and overcome the Great Depression, and in 1937 the National Bank of Foreign Trade was created to promote agricultural exports.

During World War II the developer State was consolidated and the industrialization of the country gained momentum. The import substitution model—favored by the restrictions imposed by the United States on its exports of strategic goods—united industrial policy with trade policy, and served as a guide for a broad deployment of instruments, quotas, tariffs, and subsidies. The financial support would be, at the core, Banco de México—a heterodox central bank that favors growth without neglecting stability—and Nacional Financiera that, in its ‘golden age’, financed the industry, created strategic steel, copper, fertilizer, and cellulose companies, and acted as the government’s main financial agent to resort to foreign credit.

Starting in 1958, at the time of stabilizing development, a selective credit policy was launched with the purpose of channeling a part of savings to financing priority sectors. Development trusts were also created to complement these policies: FIRA (agriculture), Fonei (industrial equipment), FoviFoga (housing) and Fonatur (tourism). At Nacional Financiera, the entire industrial credit chain for SMEs was integrated, from pre-investment studies, loans, guarantees, to risk capital.

In the midst of the 1982 crisis, Miguel de la Madrid made a law to order all development bank functions; furthermore, Fomex and IMCE would be merged with Bancomext, making the latter responsible for promoting foreign trade. During the crises, international organizations—former allies—and neoliberal economists ‘weaved the Black Legend’ of development banking as a statist instrument that distorts the allocation of resources and competes with private banks. But Bancomext was the only public-private bank that was never rescued and that was able to continue getting foreign credit.


In the early sixties and aiming to consolidate the reconstruction of its economy, the government of Japan, the great developer state, set itself the goal of doubling the national income over one decade. For this, it mobilized all of Japan Inc. and managed to grow more than 8% annually. The Ministry of Industry and Commerce (MITI) was the core of this strategy that achieved a prodigious boom in exports, through the conjunction of industrial—particularly in heavy industry—and trade policies. This effort was underpinned by the creation and financing of the Development Bank of Japan and Eximbank. Korea, Taiwan and Singapore followed suit.

In the 1930s, Brazil embarked on a ‘developmentalist’ path, parallel to that of Mexico, during the Getúlio Vargas administration and later, in that of Juscelino Kubitschek. In 1952, practically two decades after the appearance of Nacional Financiera, the great Development Bank of Brazil (BNDES) was founded and since 1994, responding to another crisis, Presidents Cardoso and Lula, with their Accelerated Growth Program, promoted the new ‘neo-developmentalist’ strategy that Minister Bresser-Pereira intellectually articulated as a ‘developmentalism’ updated to the new circumstances. The BNDES financed the equivalent of 25% of GDP.

Based on Deng’s reforms and his ‘market socialism’, China is thought to have also followed a neo-developmentalist strategy that privileged an annual growth target of 8%. To support this strategy, the development bank figure was created, the so-called policy banks—one for each priority sector—which articulate programs and projects. The largest is the large China Development Bank, which has provided loans for the equivalent of 80% of GDP. At a global level, the Asian Infrastructure Investment Bank was created to cover the spaces abandoned by the World Bank.

As we can see, the best historical experiences and the most successful countries today have had developmental states that promote industrial and trade policies based on well-capitalized “policy banks.”



In 2021, Mexico faces one of the most complex challenges in its history. After the historic drop in GDP in 2020—around 10%—the loss of formal and informal jobs in the millions, the impact on the revenue of most vulnerable groups, the increase in poverty, and an estimated GDP growth of between 2 and 3 percent, serious questions are raised for 2021 about the time it will take for the country to go back to the economic activity before the crisis. The problem is still that the government’s incentive plans for the economy are not enough: the weakest among the large countries. The budget is practically that of the previous year. Given the limited government fiscal space resources, development banks can play an important role.

Development banking, a powerful and effective instrument, has been transformed in recent decades into ‘underdevelopment banking’. As of December 2019, it yielded a mediocre total loan of 1.207 trillion pesos, somewhat lower than what was delivered a year earlier (1.227 trillion, which is equivalent to 5% of GDP). In 1980 Nafin, on its own, provided the equivalent of 7% of GDP. On the other hand, the loan granted by development banks represents barely the equivalent of 20% granted by commercial banks (five trillion pesos), when at another time it managed to channel 50%. A change is seen in the participation of the different development banking institutions in the total loan portfolio. With figures as of December 2019, Banobras contributes the most with 462 billion pesos; Nafin, ‘the crown jewel’, lagged behind with 309 billion; and Bancomext with 253.4 billion.

The main deformation centered on our great industrial policy bank, Nafin. In the absence of such a policy, it has been given a subordinate role vis-à-vis private banks and has been relegated to the main part of its portfolio: giving second-tier loans, rediscounting private banking loans, and granting guarantees, concentrating on the large banks to reduce their risk, facilitating the liquidity of large companies via factoring to their suppliers, and carrying out financial market operations.

Its primary mission is to support SMEs, often in a ‘reactive’ way. It has some support programs for traditional sectors such as textile and footwear, and it ventures into social programs with support for women and young entrepreneurs, and sustainable development. It is important to note that the new administration seeks to increase the industrial portfolio, based on ten strategic activities, which includes new technologies. It continues to support venture capital, stock market development, and sustainable projects; all this with extremely scarce resources of around 300 billion, the equivalent of 1% of GDP.

Bancomext had a ‘rebirth’ when it became ‘independent’ again during Enrique Peña’s administration. It had several good directors. It maintained first-tier loans and ventured into new areas and development programs, which in 2017 earned it the Development Bank of the Year Award from ALIDE (Latin American Association of Development Financial Institutions). It understood well its character as a development bank. It designed and implemented programs for tourism, airlines, and other activities that were affected by the financial crisis of 2008-2009 and the A-H1N1 epidemic. Thus, it became the institution that grants the most financing to these sectors. It has ventured into other important activities, such as logistics with the model bridge between Tijuana and San Diego airports, financing industrial parks for the export sector in the Bajío region, and emerging projects in clean energy, such as the Tehuantepec Isthmus Wind Project. Its loan has increased 30% and profits amount to 26% per year.


The Fourth Transformation needs a new growth strategy based on renewed development banking. This new strategy must include the following fundamental elements:

  • A State that favors growth and investment. The Mexican State must assume its role as an active developer and promote accelerated, inclusive and sustainable growth of a minimum of 4% per year. For this, it must establish a consensus through a national agreement, embodied in an emergency economic reactivation program. To follow-up, an economic and social council should be created with the main actors and thinkers. A key element is a national investment program, public and private, which, based on trust, increases public investment to a minimum of 6% and total investment to 25%.


  • Policies to compensate for the very limited fiscal space. It is evident that the Mexican State, with very low tax collection, totally lacks the fiscal space to be able to fulfill its functions and satisfy the growing social and economic needs. It will have to act in two phases. First, resorting to the use of external debt (the IMF itself recognizes that it has a margin of at least 3% of GDP). Due to the downturn in economic activity, the average debt / GDP rose from 45 to 55 percent without contracting debt. The OECD average is over 80% and now in many cases 100%. However, it must prepare, at the same time, a second phase: a comprehensive, balanced and negotiated tax reform must be announced to be applied as of 2022.
  • Complementing a ‘limping’ trade policy, reviving industrial policy. Our minimum passive State has privileged, as the center of its productive policy, the trade policy, linked to NAFTA—now USMCA—as the basis for an ‘outward’ oriented growth strategy that does not generate growth. It certainly made us a great exporting country, now the first United States trade partner; and obviously it produced benefits in terms of employment and technology, particularly in the north of the country, but in practice we became a gigantic maquila, which only generated mediocre and uneven national growth. We pay for the ‘sin’, coined in the famous phrase of the Ministry of Economy: “The best industrial policy is that there is none.”


As a ‘twin concept’ of development banking, industrial policy was stigmatized by the Washington Consensus and international organizations, due to its statist, dirigiste character, which distorted the market. It has now become fashionable again, it is reborn. Nobel laureate Stiglitz and Justin Yifu Lin wrote the book The Industrial Policy Revolution; other leading economists, such as Rodrik and Mazzucato, revive it; an article “The Global Renaissance of Industrial Policy” is published in the Economist; it is also reactivated by different governments, such as Macron, Merkel, and even the United States. The López Obrador government created in February 2019 the National Council for the Promotion of Investment, Employment and Economic Growth. In this regard, Alfonso Romo declared that the president “has drawn a line... in favor of a solid industrial policy... that is opposed to neoliberal experiments.” Unfortunately, it has not materialized in a concrete and effective strategy.

Everyone talks about industrial policy, but few define what it means. It has two sides, a vertical and a horizontal one. The former is one defined by UNIDO as ‘selective intervention strategies, aimed at promoting specific activities or sectors,’ or national champion companies. The latter is the one tolerated by liberals to create general conditions favorable to the industry, i.e. deregulation, work training, incentives for technology and loans. In the little that is done, we are going against the tide: the government has gone against green ‘sustainable’ policies that favor clean energy and the environment. PEMEX cannot be a growth engine, it is a ‘bottomless pit’ that wastes scarce fiscal resources.

Trade policy must be redefined to act in a complementary way with industrial policy, increasing the local content of exports, which is a ridiculous 28%; it must integrate ‘outward’ production chains and ‘inward’ chains, efficient import substitution, export diversification; it must forget candid free trade, which nobody practices and implement ‘managed trade’ instead.


Industrial and trade policies are the cornerstones of a development strategy, but what experience shows is forgotten: in order not to be just a good intention, they must be supported by a financial policy in which development banking is one of the main axes. Thus a ‘virtuous triangle’ is integrated, which is fed back and energized. This renewed development banking must include the following characteristics:


  • Development banking is a powerful instrument of the developer State that must be transformed into policy banks, as they are called in China. This requires formulating sector and regional policies that help shape a national strategy and are supported by well-evaluated priority projects. Participating in the healthy evaluation of federal projects, which is much needed (Dos Bocas, Tren Maya, Santa Lucía).
  • Faced with the current ‘depression’, development banks must become a powerful instrument of countercyclical policy and double the current amount of their total loan portfolio, which means increasing it by around one trillion pesos or the equivalent of 5 % of GDP. To this effect, it must borrow, using all external and internal credit instruments. It should have access to financing from Banco de México, as other countries do.
  • Be a parafiscal instrument. Link their sector loan programs to budget programs of the corresponding sector ministry, thus expanding the budget de facto. Hence, the Nafin and Bancomext loan program would be linked to the budget of the Ministry of Economy.
  • Use all instruments in financing: first-tier loan, second-tier rediscounts, guarantees, venture capital. But the loan must be primarily long-term and support capital investment, and not so much working capital, which corresponds to private banking, and with which it must be complemented. But commercial banking, now focused on increasing profits, should be more closely linked to the purposes of national development, with direct credit for production and investment, not only favoring consumption.
  • Development funds must be integrated into the corresponding sector bank and be consolidated. Fonatur must be linked to Banobras (due to its vocation in infrastructure) or to Bancomext (due to its hotel financing). Financing for SMEs was deformed by client ‘banks’ that were mistakenly created in the Ministry of Economy: the Entrepreneur Fund, the SME Fund, the MIPYME, which duplicate the functions of Nafin, and which should be consolidated in said institution.
  • Assume the role of training human capital and technical positions. Directors must comply with the law that requires them to have held senior management positions in financial institutions for five years. They must last beyond six-year administrations—there has been a very high turnover: five CEOs in ten years in various institutions. Creating a civil service career, under ‘austerity’, has cost 20% of employees. Project evaluators are almost a dying breed. They must have management autonomy.


The bank of infrastructure policy and federalism. It is the largest development bank and it fulfills true development banking functions. Countries like Canada and the United States want to found one. This bank finances public infrastructure projects the most. It has created funds, such as Fonadin, that promote public-private projects. It is the main source of financing for states and municipalities, including the most marginalized, and intervenes when debt restructuring is necessary. It supports the institutional development of municipalities—financing urban projects—, and the modernization of their records offices to increase their collection and that of the agencies for water collection. Unfortunately, it only covers 2% of GDP. It must be increased to complement national investment in infrastructure.

The bank of industrial policy. The ‘old crown jewel’, the one that was most distorted and deformed, granting guarantees, rediscounts and factoring for the benefit of private banks. It has focused on financing SMEs, mostly those in trade and services. But this, in itself, is not industrial policy. To transcend this reactive action, it must structure an institutional program of sectoral loans, more focused on investment projects than on working capital, with a view to promoting a balanced and integrated industrial structure, and promoting new sectors and regions with technical assistance, promotion, and guidance. In the new industrial policy, it will have to concentrate on new tasks of reconstruction, transformation, and creation of new sectors, with new technology, moving from manufacturing to ‘mindfacturing’, to join the new industrial and digital revolution.

The trade policy bank has the great challenge of supporting companies in complying with the new provisions of the USMCA, raising the national content of exports and diversifying their destination, efficiently substituting imports, and supporting the new challenge of the internationalization process of Mexican companies, as does Eximbank. It will have to leverage its sectoral specialization to attend to activities such as tourism and aviation, once again highly affected by the pandemic, and venture into new fields like border transport and foreign logistics, renewable energy, and the environment. The dissolving of ProMéxico and the Tourism Promotion Council is an opportunity to recover its old commercial promotion role, which it performed at its expense. It will have to go back to supporting key embassies, which lack resources, by financing their commercial advisory services.

I will only refer briefly to other development banks. Financiera Rural, the agricultural policy bank, must be strengthened with the incorporation of FIRA, which handles five times more resources and whose operation by Banxico contradicts the objective of the central institute, which is monetary stability. Banco del Bienestar, at the heart of popular banking policy, for social inclusion. A significant part of the adult population and of the municipalities do not have banking services. This cannot be changed by decree: if there is no income, there is no savings. It is useful as a mechanism to distribute social and loan support, and to promote savings and attract remittances, but this does not require investing in hundreds of traditional ‘brick and mortar’ branches, which are disappearing. It can be achieved by agreements with other banks, with post offices (as in other countries), store chains, and digital channels. Support will be needed for the poorly supervised popular savings system, which will face hardship during the crisis. Finally, the Federal Mortgage Society, acting in coordination with Infonavit, must channel the housing policy in a satisfactory manner.



We have tried to show here that the most successful development strategy for emerging countries like Mexico is that of a developer state able to channel social consensus towards accelerated and inclusive growth. This strategy includes a solid investment program and enough fiscal space to implement it. Moreover, it boosts production through the articulation of industrial and trade policies. Both are supported by a financing policy where development banks play a key role: industrial policy for Nafin, and trade policy for Bancomext. That is the strategy that we propose, first for the recovery, and then for the economic development of Mexico. That will be a true Fourth Transformation.



1 Francisco Suárez Dávila, Crecer o no Crecer. Del Estancamiento Estabilizador al nuevo Desarrollo, Taurus, Mexico, 2013, and Francisco Suárez Dávila, “Un Sistema Financiero para el Desarrollo, después del coronavirus”, in ECONOMÍA-UNAM, issue 51, vol. 17, 2020.

2 Luiz Carlos Bresser Pereira, “El Nuevo Desarrollismo y la Ortodoxia Convencional” in ECONOMÍA-UNAM, issue 40, vol. 14, 2017.

3 Francisco Suárez Dávila, “Hacia una nueva política de comercio exterior de Estado”, in Comercio Exterior, Nueva época, issue 16, October-December 2018, and Francisco Suárez Dávila, “Banco Nacional de Comercio Exterior: El panorama histórico de un gran banco de desarrollo y su contribución a la evolución económica de México (1937-2017)”, in El cauce de nuestra memoria: Bancomext 80 años. Bancomext, November 2017.