Bank Of Mexico Research Articles

El Banco de México en el contexto de la crisis financiera global

El contexto de la crisis en curso demuestra que las posibilidades de recuperación no están cercanas, y variables como el crecimiento económico, desempleo y empleo se han agravado. En ese contexto se confrontan las políticas seguidas de tres bancos centrales, con sus obvias diferencias: La Reserva Federal, el Banco Central Europeo y el Banco de México. Procedimiento que explica que, al mantener el modelo impuesto desde hace más de treinta años, es difícil dejar atrás el estancamiento económico y las mínimas posibilidades de incrementar el empleo y combatir el desempleo.

These Are the Good Old Days: Foreign Entry and the Mexican Banking System

In 1997, the Mexican government reversed long-standing policies and allowed foreign banks to purchase Mexico's largest commercial banks and relaxed restrictions on the founding of new, foreign-owned banks. The result has been a dramatic shift in the ownership structure of Mexico's banks. For instance, while in 1991 only one percent of bank assets in Mexico were foreign owned, today they control 74 percent of assets. In no other country in the world has the penetration of foreign banks been as rapid or as far-reaching as in Mexico. In this work we examine some of the important implications of foreign bank entry for social welfare in Mexico. Did liberalization lead to an (or decrease) in the supply of credit? Did liberalization lead to an (or decrease) in the cost of credit? Did liberalization lead to an (or decrease) in the stability of the banking system? In order to answer these questions, we must first ask, increase (or decrease), measured on what basis? There are, in fact, two distinct conceptual frameworks through which one can assess the impact of foreign bank entry. One is concerned with measuring the short-run impacts of foreign entry on credit abundance, pricing, and observable stability using reduced form regressions. The other is an institutional economics conception of how to measure performance. It is focused on understanding whether foreign entry gave rise to difficult-to-reverse changes in the political economy of bank regulation, which will affect competition and stability in the long term, outside the period that may be observed empirically. We employ both conceptions in this paper.

Evaluación del mandato de estabilidad de precios del Banco de México: Atado de manos

Evaluamos los resultados económicos del Banco de México, institución que tiene como objetivo prioritario procurar la estabilidad del poder adquisitivo de la moneda. Definimos un marco crítico basado en aspectos legales, indicadores económicos y teorías económicas, para evaluar su desempeño durante y después de “La Gran Recesión”.

The legacies of partial possession: From agrarian struggle to neoliberal restructuring in Mexico and Colombia

How have communities in Latin America responded to neoliberal agrarian reforms? We address this question via an incorporated comparison of two regions affected by rural restructuring: La Laguna, Mexico and Viejo Caldas, Colombia. Prior to the introduction of market-led reforms, agricultural producers in both regions were heavily dependent on state support, yet in neither did they mobilize to resist neoliberal policies that were incompatible with the prevailing system of state-managed commercial agriculture. What explains this outcome? We argue that acquiescence to neoliberalism was, paradoxically, a legacy of agrarian unrest: In response to major mobilizations, historic land reforms were carried out in La Laguna and Viejo Caldas during the 1930s that created regional political economies organized around cotton and coffee, respectively. Over time, these economies evolved into regimes of ‘partial possession’ wherein the social reproduction of rural livelihoods came to depend on specific state institutions: the Ejido Bank in Mexico and Fedecafé in Colombia. We attribute the absence of organized opposition to neoliberal reforms in La Laguna and Viejo Caldas to the conservatizing political transformation that partial possession engendered. In so doing, we highlight the importance of regional histories in shaping popular responses to neoliberal restructuring across the variegated landscape of Latin America’s countryside.

Una cuestión de intereses: entre Benito, Maximiliano y Porfirio. La reforma liberal y la liberalización de tasas de interés en Yucatán, 1850-1900

En este artículo se analiza el efecto del fin del mutuo usurario en los mercados de crédito tomando como ejemplo el desarrollo del mercado de crédito hipotecario en Yucatán durante el auge henequenero del siglo XIX. Demuestra que las Leyes de Reforma que acabaron con las restricciones sobre las tasas de interés en México transformaron el mercado de crédito legal e iniciaron una nueva época en la historia financiera del país. Antes de la creación de los bancos en México, las obligaciones hipotecarias privadas protocolizadas por notarios eran una de las pocas fuentes de crédito formales en el país. Mediante estas actas notariales, se observa el efecto del decreto juarista de 1861 sobre el mercado hipotecario de Yucatán y el papel central que desempeñaba el notario en las transacciones privadas de crédito a largo plazo. Este análisis se apoya en aproximadamente 1 000 actas hipotecarias protocolizadas entre 1850 y 1900, salvaguardadas en el Archivo General del Estado de Yucatán.

Central Bank Exchange Rate Interventions and Market Expectations: The Case of Mexico during the Financial Crisis 2008-2009

The objective of this research paper is to analyze if exchange rate interventions that the Central Bank of Mexico had during the 2008-2009 financial crisis influenced the Mexican Peso-US Dollar exchange rate market expectations. Expectations are gauged by Risk-Neutral Densities (RNDs) extracted from option prices. The method used to estimate RNDs is the Volatility Function Technique proposed by Malz (1997). The results show that interventions caused changes in expectations around the date of the intervention. There is a common pattern of statistical significant decreases in exchange rate implied mean and variance immediately after the period of intervention. The higher implied moments decrease as well. There is also found a causality effect that runs in both directions, that is, between exchange rate expectations and Central Bank interventions.

Factors Underlying the Adoption of Online Banking by Mexican Consumers

Although Mexico is considered one of the most important emerging markets in global business, there is littleknowledge about the adoption of internet banking in Mexico. Thus, the purpose of this study is to examine thefactors underlying the adoption characteristics of internet (online) banking by Mexican consumers, which willbenefit both academics and financial institutions. The paper uses both qualitative and quantitative approaches forresearch methodology. The qualitative method is used to gain insight into how consumers value online bankingby interviewing both adopters and non-adopters of internet banking (hereafter IB). Then, a questionnaire isdeveloped to include thirty-nine questions. The paper utilizes Factor Analysis to identify the characteristics ofthe adoption and the Analysis of Variance (ANOVA) to examine the differences between adopters andnon-adopters’ attitudes toward some attributes of the adoption. The results from Factor Analysis suggest eightcharacteristics of the adoption, namely difficulty, trust, compatibility, third party concerns, human contact, socialinfluence, security, and computer proficiency. Analysis of Variance shows that adopters and non-adoptersdiffered on their attitudes toward four attributes of the adoption: difficulty, trust, compatibility and humancontact. Comparing the attitudes of adopters and non-adopters with the issues of security and third partyconcerns, the study found no significant differences. An interesting finding was that human or physical contactwas considered important for non-adopters, showing the weakness of online banking. A discussion of the resultsand the implications for bank managers were included in the study.

Contributors

Contributors

The Effect of Liberalization on Banking Efficiency: Evidence from the Five Largest Banks in Mexico

The Effect of Liberalization on Banking Efficiency: Evidence from the Five Largest Banks in Mexico

Coding and traceability used by tissue banks in Mexico

This short communication describes how some Mexican tissue banks have established their own system for coding and traceability of tissues.

Franz Mayer Museum: origin, history and present situation of a cultural institution dedicated to decorative arts and design

This overview is devoted to the Franz Mayer Museum (MFM), an institution that exists thanks to Franz Mayer, a German collector and bibliophile, who later became a Mexican citizen. In the 1970s, he donated his collection of decorative art and books to Mexico through a Cultural Trust, managed by the Bank of Mexico. This contribution analyzes the origins, history and present situation of the MFM which, since opening its doors in 1986 to date, has become an important reference point in Mexico’s museological and cultural circles.

Exchange rate realignments and risks of deflation in North America

The US dollar has strengthened in recent months against most major currencies, with the exception of the yen. It has also gained strength against emerging market currencies, and the US effective exchange rate has appreciated by just over 7 per cent in the past three months. Emerging market declines have been exacerbated in recent weeks by the turbulence on financial markets that has forced stock markets to interrupt trading on several occasions. Figure 13 shows effective exchange rates for the US, Canada, Mexico and Brazil. Central banks in Mexico and Brazil have intervened in currency markets in recent weeks to stem the decline of their currencies, which have dropped against the dollar by nearly 20 per cent in the case of Mexico and 40 per cent in Brazil since the beginning of September. If stock market trading stabilises, much of these losses should prove temporary. Our forecast assumes that a depreciation of 10 per cent in effective terms in the Brazilian real and 5 per cent in the Mexican peso is sustained. While this raises the inflationary outlook for these economies, gains in competitiveness will help moderate the impact of the global recession on Latin American economies. However, a more sustained depreciation will put the banking systems in these countries at risk as it becomes increasingly difficult to service debt in foreign currency.

The impact of the International Atomic Energy Agency (IAEA) program on radiation and tissue banking in Mexico

Tissue banking started in Mexico in 1948-1949, when two bone banks were established, one at the Infantile Hospital of Mexico and other at the Central Military Hospital. Mexico has benefited for the implementation of the IAEA program since through it has been able to settle down and to consolidate the Tissue Bank at the Instituto Nacional de Investigaciones Nucleares ININ (National Institute for Nuclear Research). This is the only bank in Latin America that has a Quality Management System in force, certified under ISO 9001:2000 since August 1, 2003. The first tissue processed was amnion. The main products of the BTR are amnion and pig skin. Both are biological tissues which their main use is as a wound dressing in patients with burns, scars, diabetic ulcers, epidermolysis bullosa, damaged ocular surface, etc. The General Health Law, published in 1984 and reformed in June 19, 2007, describes the procedure for the disposal of organs, tissues and human cadavers in its fourteenth title and in the Regulation for Sanitary Control. During the period 2001-2005, the ININ Tissue Bank produced 292 sterilised tissues (amnion, 86,668 cm(2), and frozen pig skin, 164,220 cm(2), at an estimated cost of 1,012,668 Mexican pesos. Until 2006, one hundred eighty five (185) patients have been treated with the use of sterilised tissues produced by the ININ Tissue Bank. The radiation source used for sterilisation of tissues is an industrial Cobalt-60 irradiator model JS-6500 AECL, which belongs to ININ. This equipment is located in other building, close to the BTR, in the Centro Nuclear de México "Dr. Nabor Carrillo Flores" (Nuclear Center of Mexico). Until 2006, six hospitals use in a routine way the sterilised tissues produced by the ININ Tissue Bank, for the treatment of burns originated by diverse agents like flame, electricity, liquids in boil, chemical reagents, as well as for the reconstruction of the ocular surface. Two of these hospitals treat patients of very low economic incomes, mainly needy individuals, who cannot afford to pay this type of treatments in other hospitals due to their high cost. The results obtained up to now are highly promising.

The Impact of Transnational Migration and Remittances on Quality-of-Life in Chalchihuites, Zacatecas

IntroductionIn 1942 the bilaterally approved Bracero Program invited citizens from Mexico the opportunity to supplement the diminished U.S. workforce. Over the next 22 years an estimated five million braceros (workers) entered the U.S. under legal contracts and an equal number of Mexican laborers came illegally to fill vacant jobs in the agriculture and railroad industries (del Pinal and Singer 1997; Martin and Midgley 2006). By most accounts this program unwittingly ushered in the beginning of large scale illegal immigration. Equally significant, however, is that since the program's inception a considerable remittance stream between the two countries has developed.With an estimated 20 million Mexican-born people living in the U.S. (both legally and illegally) (Migration Information Source 2005; Martin and Midgley 2006; The Economist 2007), the flow of remittance money to Mexico has increased dramatically over the past decade (Figure 1). Currently, remittances rank second behind Petroleum as the leading source of foreign currency in Mexico (The Economist 2005). In 2005, Mexicans sent just over US$20 billion home and a year later the amount slightly exceeded US$23 billion (Bank of Mexico 2007). This ranks Mexico as the second largest recipient of remittances in the world after India and ahead of China (World Bank 2006).Since the beginning of mass emigration from Mexico to the U.S., five states in Mexico's central highlands have traditionally sent a disproportionate number of migrants to the U.S.: Guanajuato, Jalisco, Michoacan, San Luis Potosi, and Zacatecas (Figure 2). Households in these five states have also received an overwhelming share of the total remittances sent to Mexico. In recent years, however, U.S. immigrants from Mexico have originated from all stretches of the country. Today, 18% of all adults in Mexico receive remittances (Suro 2003; Gonzalez Amador 2005) and the average amount sent home on a monthly basis has remained constant over the past decade at about US$335 (Figure 1) (Bank of Mexico 2007).The past five years have witnessed an increasing number of studies sponsored by such international organizations as the World Bank, Inter-American Development Bank, International Monetary Fund, and Multilateral Investment Fund seeking to better understand the economic impact that remittances are having on growth and development for various countries. Conclusions reached by these reports suggest that remittances: 1) are an important source of foreign currency, 2) provide five times more money to citizens in need of development assistance than international aid (Williams 2006), and 3) effectively alleviate extreme poverty (IADB 2006). Yet for all their benefits, remittances lead to surprisingly little economic development or long-term investment and growth (Fajnzylber and Lopez 2006).Significantly fewer studies have considered the affect of transnational migration and remittances at the household level. Most of this work that has reached print has taken one of two main approaches (McKenzie 2006). The most common has been to identify who receives the money and how it is used. With a large percentage of men working in the U.S. and absent from village life, these studies have found that most of the money is sent to women, especially wives and mothers (Suro 2003; Bank of Mexico 2005). Moreover, 85% of Remittances sent home to Mexico are used to meet basic household needs and everyday living expenses, including education and health care (Figure 3) (Suro 2003). Sadly, less than 10% of the money is used for land investment, construction costs, or business development (IADB 2004). The three principle reasons why so little money is invested in land or business development are: 1) little money is left over after bills and household expenses are paid, 2) rural households tend to lack skills needed for such economic development, and 3) Mexico's banking infrastructure has not adequately provided investment opportunities to the country's rural, lesser affluent households (Bank of Mexico 2005; Massey 2005). …

Related Lending and Economic Performance: Evidence from Mexico

Related lending, a widespread practice in LDCs, is widely held to encourage bankers to loot their banks at the expense of minority shareholders and depositors. We argue that neither looting nor credit misallocation arenecessary outcomesof related lending. On the contrary, related lending often exists as a response to high information and contract-enforcement costs. Whether it encourages looting depends on other institutions, particularly those that create incentives to monitor directors. We examine Mexico's banking system, 1888–1913, in which there was widespread related lending. We find little evidence of credit misallocation, despite a financial crisis and government-organized rescue.

Experiments in Financial Liberalization: The Mexican Banking Sector

Since the liberalization of its trade in the mid-1980s, Mexico has pursued an aggressive globalization strategy, which today makes it the country with the most free trade agreements in the world. This liberalization strategy has also included the banking sector, particularly since 1997, when all restrictions to the entry of foreign banks were removed. The history of the banking sector in Mexico includes episodes of nationalization in 1982, privatization in 1992, and near-complete failure in 1995. Since then, however, the Mexican government has undertaken a series of bold reforms that have contributed to the modernization of its financial system. This paper documents the evolution of Mexico's banking sector starting from its nationalization in 1982 and culminating with the increased entry of foreign banks in recent years that has driven the recovery of bank credit to the private sector.

Tissue banking in Mexico

Here, we describe our Tissue Banking experiences of 4 years of activity in Mexico. Data of allografts provided by our Bank and bone retrievals performed by our teams between February of 2001 and August of 2004 were included. There were 100 bone donors, a total of 1,107 tissues were obtained with an average of 11 tissues by retrieval, samples from all tissues were obtained during retrieval and cultured for bacterial contamination, 250 tissues were positives to bacterial growth with an average of 22.58% of bacterial contamination of tissue by retrieval. A total of 4,493 allografts were provided and were utilized in 3,643 patients. The allografts were used mainly by orthopedic surgeons (62%) and dentists (30%). The most used allografts were morcellized cancellous bone 31%, pulverized 25% and chips of cancellous bone 20%. Among orthopedic patients the most frequent procedures were related with spine degenerative diseases 39.09%, followed by non-pathological fractures and its complications 28.67% and bone tumors and cystic bone lesions 11.59%. Sustained increase of allograft utilization in Mexico reflects a great necessity for them in our country. The increase in public awareness about tissue donation has allowed an increase in tissue donations and retrievals.

RAROC Evidence of Agency Problems in the Banking Systems of Mexico, Thailand, and Turkey

Following recent models using equity returns to proxy for credit ratings, the article examines evidence of agency problems in banks of Germany, Mexico, Thailand, and Turkey. The paper uses the RAROC (Risk-Adjusted Rate of Return) method to identify optimal bank portfolios during the sample period. We find that banks in Mexico, Turkey and Thailand would have chosen portfolios with less risk and higher returns using this method than the portfolios they actually chose, suggesting agency problems. The hypothesis of efficient, RAROC-consistent portfolio choice by German banks, on the other hand, cannot be rejected.

Improving the mechanisms of global governance? the ideational impact of the World Bank on the national reform agenda in Mexico

Improving the mechanisms of global governance? the ideational impact of the World Bank on the national reform agenda in Mexico

An Application of Multistage Real Options: International Expansion Strategies of Insurance Companies

The implementation of the final phase of the North American Free Trade Agreement (NAFTA) has produced a flurry of merger and acquisitions across Canada, Mexico and the United States. This process has brought in wholesale acquisition of companies offering financial services in Mexico. More than 75% of banks in Mexico are foreign-controlled and over 60% of the insurance companies in Mexico are in foreign hands. Many companies enter the markets for financial services in stages. This process can be modeled using multistage real options. Using Mexican insurance market data and simulation models, we show how target companies can be valued taking the real options into account.