Seminario IECON "Banking Internationalization and Financial Crash: The Case of the Mexican Crisis of 1982"

Presenta Sebastián Álvarez (Oxford University)

Abstract

"The rise of foreign banking and the increasing integration of national financial systems are salient features of the world capital markets in the second half of the 20th century. With the end of capital controls after the collapse of Bretton Woods in the early 1970s and the expansion of the Euromarkets that followed of the oil shock of 1973, commercial banks from industrial and developing countries expanded their international operations along with a growing network of foreign offices and correspondent banks overseas. Although extensively study for U.S. and European banks, the international expansion of their counterparts in developing countries has received much less attention in the literature on international finance during the 1970s and 1980s. In the case of Latin America, leading banks become increasingly internationalized during this period and they were actively involved in the Euromarkets and the international bank lending boom that lead to the debt crisis of 1982. This paper study of the experience of Mexico, ones of the biggest countries of the region and one responsible for triggering the debt crisis at an international level. Between 1973 and 1982, the six largest Mexican banks went international and expanded their network of foreign agencies and branches abroad, especially in the U.S. and London, and increasingly intermediated foreign capital with domestic borrowers. As a result, their foreign liabilities went from representing about 0.7 percent of total assets and liabilities in 1975 to 20 percent in 1982, while the financial condition of the entire banking system became increasingly weak. By drawing in a combination of quantitative and qualitative methods based on primary sources, the paper investigates the nature of the internationalization process of the banks and the risks behind the business model undertaken in their international activities, as well as the situation of the sector at the time of the outbreak of the crisis. It provides new insights on the subsequent renegotiating process between Mexico and its international creditors and the political economy of the debt management strategy implemented to deal with the crisis".

Martes 20/08/2019

12 hs, Salón Multifuncional

Facultad de Ciencias Económicas y de Administración