Bank nationalization in Mexico
Causes
Description
Consequences
It was proceded by the outbreak of the debt crisis in August 1982. The arguments to seize banks were to implement an exchange rate control, and to bring to and end the outflow of funds from the country to foreign nations.
It took place on September 1, 1982 in Mexico, when president José López Portillo issued a decree where by Mexican private commercial banks were nationalized.
Product shortage, that caused groceries to become scarce or more expensive, turning into inflation.
More than 80 percent of foreign currency inflows were from oil.
Mexico´s debt quadrupled (from 20 to 80 billion dollars).
With the situation out of control, the president made the bankers guilty and decreed the control of changes.
López Portillo devalued from 22 to 30 pesos per dollar, later to 50 and was already going to 100 but he was advised to control exchanges in disguise by cancelling accounts from mexicans in dollars by giving the 70 pesos per dollar. (The Mexdollars)
It took six-year term to recover with the dollar reaching 3,000 pesos.
Bibliography
High interest rates for productive loans.
Excessive foreign debt.
Economic activity suffered a contraction of 4.4% per year.
Risign unemployment.
Bank privatization
The president of Mexico, Carlos Salinas de Gortari, sent a bill to Congress yesterday that will modify the ownership of Mexican state banks through a property regime. The project, which has been met with surprise in the financial media, establishes that "the State intends not to be the majority shareholder of each and every one of the banking institutions, although it will retain a share in commercial banking and will strengthen those institutions oriented towards promotion of specific priority activities"
Consequences
The bank was nationalized in 1982 by the then president, José López Portillo, because of: The devaluation of the peso, high inflation and capital flight.
The constitutional reform initiative is due to the unavoidable need to focus the attention of the State on the fulfillment of its basic commitments: to respond to the needs of the population and increase its social welfare"
Banks sold to foreign countries
It was due to the urgent need to focus the attention of the State on the fulfillment of its basic commitments: to respond to the needs of the population and increase its social welfare.
It was thought that it was possible to continue reducing the fiscal deficit and the internal debt burden
Obtain the highest possible income from the sale of the banks, help improve the functioning of the country's financial system and preserve the ownership of the bank's shares in the hands of Mexican investors.
Consequences
Ministry of Finance opened the opportunity for new multiple banks to be established in Mexico. The call did not fall on infertile ground and in a relatively short period of time at least 19 new private institutions with this specialty opened their doors, including the following banks: Interstate, Del Sureste, Industrial de Jalisco, Capital Interacciones, Inbursa, Quadrum, Pronorte and Northern Region.
Bank privatization in Mexico took place in a context that was too inconvenient to produce satisfactory results.
It generated a domino effect against the popular economy, whose results suffer among the governed to this day.
Legal modifications that were made to legally introduce the instruments that would serve the interested parties to obtain a portion of the banking system through auctions carried out by the federal government, not only for the acquisition of banking institutions but also of formal guarantees to perpetuate uninterrupted possession over them —despite the embezzlement and theft that took place just after the Salinista administration ended.