The nexus between business groups and banks: Mexico, 1932–1982

Abstract

Over the twentieth century, the Mexican financial system emerged embedded in business groups, as a way of serving their financial needs. Until 1982, Mexico's banking system experienced unprecedented expansion. This article explains how, despite extensive insider lending practices, the relationships between business groups and financial intermediaries were sound enough to sustain them: first, because the commercial banks developed a certain autonomy from their related business groups; and second, because counterbalanced decision-making occurred when property was shared by two or more business groups. However, the ownership of banks remained concentrated in the hands of the business groups.

Keywords:

• banks
• Business groups
• financial conglomerates
• relationship banking
• related lending
• insider lending
• Mexico
• Latin America

Acknowledgements

The author would like to express gratitude to Bernardo Bátiz-Lazo and Carlos Marichal for rich conversations about the material for this article; also thank to Nuria Puig and to two anonymous referees for their helpful comments.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. Davila, “The Current State”; Cerutti, Empresas.

2. Dávila, “The Current State.”

3. Leff, “Industrial Organization”; Lamoreaux, Insider Lending; Aoki, Toward.

4. See Haber, Cull, and Imai, “Related Lending”; Haber and Maurer, “Related Lending”; Lamoreaux, Insider Lending.

5. Aoki, Toward.

6. The annual reports and proceedings are located in the historical archives of the Banamex and the Centro de Estudios Espinosa Yglesias; the collection of press reports in the Ministry of Finance, or Secretaría de Hacienda y Crédito Publico (SHCP), is located in the Fondo Archivos Económicos, Secretaría de Hacienda y Crédito Público.

7. Castañeda, “Evolución de los grupos,” 603.

8. Haber, Maurer, and Razo, The Politics; Anaya, Colapso y reforma.

9. Cárdenas, “La economía mexicana.”

10. Anaya, Colapso y reforma.

11. Del Angel, “La paradoja.”

12. Del Angel, “La paradoja”; for contemporary accounts see Goldsmith, The Financial Development; and Brothers and Solis, Mexican Financial.

13. Espinosa and Cárdenas, La Nacionalización; Del Angel, Bazdresch, and Suarez, Cuando el Estado.

14. The origins of these links of kinship may have had an “ethnic” component, as in the case of groups originally from Barcelonette and entrepreneurs from the same regions and districts of Spain. They may also originate from political loyalties, as in the case of some groups that arose after the Mexican Revolution, or with ties to a particular region of Mexico.

15. Further detail can be found in Castañeda, “Evolución de los grupos”; Cerutti, Empresas; Cerutti and Marichal, Historia de las Grandes; Derossi, The Mexican Entrepreneur; Ludlow, 200 emprendedores.

16. Cárdenas, “La economía mexicana,” 503–545.

17. Understood by Mexican entrepreneurs as ‘those who were citizens residing in the country’ and even ‘those who were born in other countries’; about the “Mexicanisation” process see Ortiz Mena, El Desarrollo Estabilizador.

18. Cerutti, Hernández, and Marichal, Grandes empresas; Haber, Industry and Underdevelopment.

19. Castañeda, “Evolución de los grupos,” 603–631; Chavarin, Banca, grupos económicos.

20. Cárdenas and Del Angel, Acciones y Valores.

21. Castañeda, “Evolución de los grupos,” 603–631.

22. Gómez-Galvariato, Industry and Revolution and “Networks and Entrepreneurship”; Maurer and Sharma, “Enforcing Property Rights”; Haber, Industry and Underdevelopment.

23. Del Angel, “La paradoja,” 635–662; Banco de México, Rodrigo Gomez.

24. As a result, most of the banking system was connected in a network of interlocking directorates; for the implications of this network see Del Angel, “Networks, Information.”

25. Aoki, Toward.

26. Cárdenas and Del Angel, Acciones y Valores, 42–65.

27. See Haber and Maurer, “Related Lending”; Maurer and Sharma, “Enforcing Property Rights”, for precedents during the last quarter of nineteenth century.

28. See Lamoreaux, Insider Lending, for these activities in New England banking.

29. Del Angel, “La paradoja,” 645–649; Banco de México, Rodrigo Gomez.

30. Bátiz-Lazo, “The adoption.”

31. The 20 largest banks, at least, were traded in the stock market.

32. Also cf. Ludlow, 200 emprendedores; Marichal and Ludlow, Banca y Poder; Hamilton, The limits.

33. Castañeda, “Evolución de los grupos” and La Empresa Mexicana; Chavarín, Banca, grupos económicos; Granovetter and Swedbert, The Sociology.

34. Cerutti and Marichal, Historia de las Grandes; also cf. Hamilton, The limits; Castañeda, La Empresa Mexicana; and Chavarín, Banca, grupos económicos; Basave, Morera and Strassburger, Propiedad y Control and Los Grupos Financieros.

35. Anuario Financiero; Del Angel, “La Banca Mexicana. Características”; Suárez, Comentarios.

36. Anuario Financiero; Cárdenas, Guevara, and Mata, Banco Mexicano Somex.

37. Anuario Financiero; Ludlow, 200 emprendedores.

38. Anuario Financiero; Ludlow, 200 emprendedores.

39. Raul Bailleres, Salvador Ugarte, Eustaquio Dominguez and Ernesto Amezcua formed an association of business interests. The nickname grupo Buda, after their initials, was given by the press of the time. However, it was not a business group, as misinterpreted by some works, see for instance Camp, Entrepreneurs and Politics. In fact, each of them led a discrete business group. But their interests converged on the financial firms in which they were involved.

40. Anuario Financiero; Del Angel, “La Banca Mexicana. Características”; Ludlow, 200 emprendedores.

41. Anuario Financiero; Banamex, Annual Reports; Bancomer, Annual Reports.

42. Del Angel, “¿Por qué BBVA Bancomer” and BBVA-Bancomer.

43. Del Angel, “¿Por qué BBVA Bancomer”; Bancomer proceedings of the board meetings.

44. In part, due to his role at the bank, Manuel Espinosa Yglesias eventually became the leading figure in the Mexican banking and business sectors of the time.

45. Del Angel, “¿Por qué BBVA Bancomer” and BBVA-Bancomer; Bancomer Annual Reports.

46. Ley General de Instituciones de Crédito, Art. 99-bis, Reform of December, 1970.

47. The Articles modified were 2, 19, 26, 29, 30, 31 45, 94-bis and 138-bis, Ley General de Instituciones de Crédito.

48. At the same time, the reform aimed to facilitate the regulation of consolidated intermediaries. However, many analysts perceived this move as a step toward eliminating small banks by forcing them to merge with larger financial groups. See Del Angel, “La Banca Mexicana. Características.”; Cordero and Santin, Los grupos industriales.

49. Reglamento para Operación y Establecimiento de Bancos Múltiples, March 16, 1976, at “Legislación Bancaria”.

50. La Porta, López, and Zamarripa, “Related Lending”.

51. Aoki, Toward; Aoki and Patrick, The Japanese.

52. Ley General de Instituciones de Crédito, Art. 41, sub-section, VIII, Reform of 1962, at “Legislación Bancaria”.

53. Ley General de Instituciones de Crédito, Art. 46-ch, Reform of Dec-29, 1962, at “Legislación Bancaria”.

54. Ley General de Instituciones de Crédito, Art. 28, Reform of Dec-29, 1962, at “Legislación Bancaria”.

55. Ley General de Instituciones de Crédito, Art. 91-bis, Reform of Dec-29, 1962, at “Legislación Bancaria”.

56. For intermediaries whose liabilities totalled less than 1 billion pesos, the limit was 3% of the total liabilities, for those with liabilities greater than 1 billion it was 2%. For inter-bank liabilities and liabilities in favour of other intermediaries, the limit was 10%. Ley General de Instituciones de Crédito, General Rule Regarding the Maximum Amount of direct or Contingent Liabilities that a Credit Institution may have in the name of the same Person, Organization or Group of Persons. March 8, 1977, at “Legislación Bancaria”.

57. Cárdenas et al., Banco Mexicano Somex.