Mexico City – An analyst from a U.N. economic panel said here Wednesday that Mexico’s banks may be colluding to keep fees and interest rates on loans higher than they would be in a genuinely competitive market.
The idea that the banks are covertly agreeing on rates, fees and commissions “would not be an irresponsible hypothesis,” according to Marcos Avalos, a consultant with the Economic Commission for Latin America and the Caribbean.
“Why, for example, if we have more than 20 banks in Mexico, is the average cost of opening a line of credit 30,000 pesos ($2,752)?,” the ECLAC researcher asked as he presented the panel’s study on Banking Competition in Mexico.
Conditions in Mexico’s financial system as a whole, he said, “are not the best we could have if we would permit the entry of other financial agents.”
Nearly 90 percent of Mexican banks are foreign-owned.
Avalos said he and fellow ECLAC researcher Fausto Hernandez found that the main cause of Mexico’s costly loans and high banking fees lies in the “obstacles imposed to competition and to the entry of new competitors.”
The Mexican banking sector “has not demonstrated good performance” since the 1990-1994 process of privatization and deregulation, Avalos maintained.
In fact, the first major consequence of the liberalization was a mid-1990s financial meltdown that forced Mexican taxpayers to foot the bill for tens of millions of dollars in defaulted loans.
The one bright spot noted by ECLAC’s Avalos was a push by retailers such as Famsa, Comercial Mexicana and Wal-Mart subsidiary Wal-Mex to obtain banking licenses. He said that if those efforts are successful, consumers could expect the increased competition to force down interest rates and fees.
