Monday, March 30, 2015

Finance enjoys historic growth

Industry experts say that the Mexican banking industry is experiencing a period of stable economic growth. CUARTOSCURO/ RODOLFO ANGUILO
Industry experts say that the Mexican banking industry is experiencing a period of stable economic growth. CUARTOSCURO/ RODOLFO ANGUILO

The News

MEXICO CITY – Mexico’s banking sector is undergoing the most stable and sustained economic growth in its history, industry experts said at a press conference Thursday.

The Mexican banking sector has seen 13 years of solid, constant growth, with an average annual rate of 7.8 percent, according to the Mexican Banking Association (MBA).

Luis Robles Miaja, president of the MBA, said, “Mexico is passing through a historic opportunity.”
“We do not say this from speculation or subjective analysis, but from the conclusion of respected economists such as Ben Bernanke, former chairman of the US Federal Reserve, and Alejandro Werner, Western Hemisphere Department Director of the International Monetary Fund.”

This is also the healthiest period of growth in the history of the Bank of Mexico, Robles added.
Although there has been a period of higher growth – during the privatization of the banks between 1989 and 1994 – this was unsustainable, and was a major contributor to the following peso crisis.
“Today, growth is competitive, solid, and sustainable,” he said. Banks are well capitalized, following international best practice standards; credit is below delinquency indices and protected by risk prevention models; private and public sectors are being served equally; and lending is being increased in a stable macroeconomic environment.

Indeed, the redirection of credit from the public sector to the private has been significant. In 2000, government received 53 percent of bank credits, whereas in 2014 this had fallen to 16 percent. Moreover, personal credit – a typically stable and secure form of debt – has risen from just 4 percent to over 22 percent during the same period.

Moreover, regulation has become broader and more strict, and the Bank of Mexico recently approved the Third Basel Accord, a global regulatory framework for capital adequacy, stress testing and liquidity risk.

“Mexico now has one of the most solid banking sectors in the world,” Robles said.

This boom is all the more impressive in the context of the international environment of recent years, he said.

Patricia Berry, director of Intercam’s research division, recalled that in the years following the global financial crisis of 2008, markets were extremely delicate, while uncertainty and volatility lead to a paralysis in investment and consumption.
After six years of reforms, cuts and stimulus, we still see in many regions slow growth, continuous austerity, deflation, insufficient demand and a need for monetary stimulus. This is particularly worrying in the Eurozone, Japan, China, the United Kingdom and the United States, she said.
Against this difficult backdrop, Mexico’s economy is projected to perform admirably, with Intercam predicting the country’s economy to grow at a steady rate of 5.5 percent over the next five years.
“Today, we are in a very important moment for the economic markets, both globally and in Mexico,” said Eduardo Garcia Lecuona, executive president of the Intercam Financial Group.

The data suggest that investment in Mexico is particularly attractive at the moment. Although growth in all sectors is not as impressive that of the financial sector, the wider Mexican economy is improving steadily, with a level of stability and sustainability the country has never seen.

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