Banking in North America

by Guy Stanley
Subject:Economic and Financial Aspects

Case Synopsis

Sergio Luna, an economist working for the Banamex Department of Economic Research, asks what might drive the financial services industry in North America to integrate regionally. He contrasts two different arguments: banking industry effects, meaning the kind of consolidations and shift towards foreign direct investment in banks seen in the past two decades encouraged by deregulation and globalization; and place-based incentives, which in the case of North America is the demographic growth of populations with interests in an integrated regional banking system - binational families of legal and illegal workers. He argues that, while banks in North America sought “foreign” investment opportunities, most of all when Mexico’s banking system was reprivatized in the late 1990s, they were also responding to clear incentives to focus investment in regional partners rather than elsewhere.

Specifically, he claims that they were driven to capture the potential for consumer demand – this analysis gives the reader insight into the simultaneously local and national nature of the banking industry, as well as the transborder nature of some consumer demographics. Furthermore, the North American consumer market will grow due to our growing population, compared with Europe’s aging population.

Luna ends with an impassioned normative argument that regionalizing financial services would also benefit our regional society, as it will more efficiently allow savings to flow to their most productive uses – maintaining that banking and investing are not about locking money away, but liberating it to generate wealth.

Questions for Discussion

  1. Should remittances be recognized as capital flows, or are they illegal and thus should not be admitted within the legal banking system?
  2. What are the contours of the immigration debate today in the United States? What is the position of the Mexican government regarding migration? In what ways do Canada’s migration policies differ from those of the United States?
  3. Mexico’s banks were nationalized in 1982, in a bid to restore the nationalist legitimacy of the López Portillo government. Why is bank nationalization – like other industry nationalizations, but also in particular – such a powerful symbol of national sovereignty? Are these ideas outdated in today’s global economy?

Relevant Courses

Although this article is somewhat technical and requires some background understanding of concepts such as relative prices, interest rate policy, and the role of commodities in an economy, the broader political implications of its argument make it a fine choice for introductory elective courses in International Political Economy, Globalization, or Border/Migration/Transborder Studies.

  • International Political Economy: units on regional economic integration, and on monetary policy. Could be used to bridge these two units, as it discusses the question of how national banking systems are set up, and how they have become more integrated in the global economy.
  • Globalization: unit on “Whither the Nation-State in a Global Economy?” Luna’s discussion of the consumer- and demographic-driven incentives leading the North American banking industry to focus on its home region raises the question of whether our economies are really “national” anymore. Also, who are “citizens” of regions? Are we simply consumers within economic regions, but what of those sending cash home to family members – the money is taxed indirectly, but it is also lost to the traditional banking industry. Countries such as Spain have worked to legalize immigrants in part to bring them in to the legal economy and to benefit from their demographic cushion as native-born populations age and family size shrinks. How are these issues dealt with in the North American region?
  • Border/Migration/Transborder Studies: Unit on the role of remittances in the regional economy. Paired with Robert C. Smith’s magisterial ethnography Mexican New York: Transnational Lives of Immigrants (University of California Press, 2006).

Suggested Bibliography

Dinan, Stephen (2007). "Growth of worker remittances back to Mexico slows to trickle." The Washington Times, September 13, Pg. A03.

Dwyer, Augusta (2006). "A New Era of Lending Dawns for Mexico's Bankless Millions." The Globe and Mail, December 29, Pg. B6.

Gullette, Gregory S. (2007). "Development Economics, Developing Migration: Targeted Economic Development Initiatives as Drivers in International Migration." Human Organization Winter 66(4): 366-370.

McKenzie, David J. (2006). "Beyond Remittances: The Effects of Migration on Mexican Households," in Calgar Ozden and Maurice Schiff, eds., International Migration, Remittances, and the Brain Drain. Washington, DC: World Bank; New York, N.Y: Palgrave Macmillan.

Merz, Babara J. (2005). New Patterns for Mexico: Observations on Remittances, Philanthropic Giving, and Equitable Development. Cambridge, MA: Global Equity Initiative, Harvard University Press.

Suggested Web Resources

InterAmerican Dialogue Project on Remittances:
http://www.thedialogue.org/page.cfm?pageID=80.

Mexican Foreign Ministry (Secretaria de Relaciones Exteriores),
Documentos sobre el tema migratorio:
http://www.sre.gob.mx/eventos/fenomenomigratorio/docmigratorio.htm

From the Study Group on “Mapping the New North American Reality”
In cooperation with the Government of Quebec, the Government of Canada,
The Institute for Research on Public Policy (IRPP), and HEC-Montreal
Montreal, November 2003.

Published in: Mapping the New North American Reality, IRPP Working Paper Series 2004-09n
http://www.irpp.org/wp/archive/NA_integ/wp2004-09n.pdf

Note: PNA is committed to encouraging intelligent discourse among our members. Comments are moderated by PNA, in accordance with the PNA Comment Policy. PNA does not necessarily endorse any of the views posted below.

2 Comments

Regionalizing these services would indeed fuel local economy. I like the idea that when money gets transferred from one to another whether through checks, certificate, or cash, that we're all helping the economy. (Comment edited by site administrator)

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