In 2014, Mexico enacted a much-publicized overhaul of its financial industry. Three years later, optimism remains high, but industry leaders say the transition to a high-performing economy is still a work in progress.
When Mexico overhauled its financial industry three years ago, most experts agreed that the moves were a step in the right direction. The question now: can the country’s economy accelerate to a sprint?
REACHING FOR REFORM
The amount of bank credit in Mexico has lagged significantly behind that in competing countries. Economists worried that the situation was holding back economic growth. In 2014, the country’s political leaders decided on a potential solution. They passed a package of improvements, which, among other things, strengthened property rights protections for creditors and formalized banking industry regulations that they hoped would spark greater competition among financial intermediaries.
Mario Maciel Castro, CEO of the banking firm CIBanco, says the reforms have not yet lived up to their full potential, but he remains optimistic. A number of sectors in the Mexican economy are poised for rapid growth, and that growth is made more likely with the reforms included in the 2014 legislation. “These measures have the potential to foster a more competitive, consumer-friendly, and healthy banking system,” he notes. A stronger financial sector will drive growth in GDP and also force down borrowing costs. This could have a major impact across the Mexican economy, but the banking executive highlighted a handful of areas where he thinks the potential is particularly high.