Abstract: Did Financial Globalization Retard Mexico's Banking Development? What a Study of Credit Networks Suggests
Prior to the Porfiriato (1876-1911) elaborate but thin international networks, based on kin, client, and ethnic affiliations promoted credit mediation in nineteenth-century Mexico, provided Mexican administrations with small but timely resources, and tied Mexico to the Atlantic commercial world. Nevertheless these networks also kept the credit market divided, small, and informal. These social networks were also deeply politicized, constraining public finance and destabilizing national politics. During the first wave of globalization in the early Porfiriato, these networks were profoundly altered. A key financial innovation of globalization was the birth of formal credit institutions. In part, this institutionalization was a result of efforts by European-North American bankers to extend their reach. However in the case of Mexico institutionalization was also the result of an internal, domestic backlash to foreign efforts. Responding to this foreign threat, local networks quickly dissolved their differences and created a rival “national” bank. Thus financial globalization unwittingly accelerated the growth of banking in Mexico. These two rivals competed vigorously for several years, until a financial crisis forced a fusion. The paper concludes that institutionalization did not resolve conflicts between rival informal networks, but rather contained (in both senses of the word) them, as witnessed by persistent internal bank conflicts over banking policies and strategies.