Market Overview
Ten years after the so-called Tequila Crisis of 1994-1995 that decapitalized the banking sector in Mexico and sharply curtailed its lending activity, the “hangover” from the crisis is not over yet. According to bank regulators and bankers in Mexico, along with the slowdown of Mexican economy in 2001-2002 that further delayed a recovery in bank financing, vestiges from the crisis are still a main reason behind the reluctance by banks to extend credit other than to their most sound customers. These facts have made it difficult for the banking system to meet Mexico’s needs.
Around 80% of the banking activity in Mexico is carried out by important foreign groups, especially from Spain. The two biggest banks in Mexico by all measures are BBVA Bancomer and Banamex, respectively the subsidiaries of Spain’s BBVA and the United States’ Citigroup. Together they account for 45% of the entire sector. Santander Serfin, controlled by Spain’s Banco Santander Central Hispano, comprises 16% of total assets whereas HSBC Mexico enjoys 10% and Scotiabank Inverlat, the subsidiary of Canada’s Scotiabank holds about 5%.
Of the Mexican banks, Banorte and Inbursa have relatively significant shares of the market, accounting for about 8% and 4% respectively. Of the remaining banks, only Bank of America, ING Bank, Banco del Bajio, Banco Azteca, and J.P. Morgan enjoy more than 1% (but less than 2%) of the Mexican market. These numbers show how competitive the market is, not only for the smaller and newer players, but also for the global giants, whose percentages of participation in the market are by no means assured along time and across regions.
All financial regulation in Mexico is conducted at the federal level and overseen by the Secretaría de Hacienda y Crédito Público (SHCP), Mexico’s Finance Ministry, which is actually the highest authority within the structure of the Mexican financial system. It sets government policy regarding the financial sector, issues regulations and licenses most financial intermediaries. Banco de Mexico (BANXICO) is independent from the government and is in charge of conducting monetary policy, assuring the operability of the system of payments and regulating the functioning of the financial system. Operation and inspection of the system is carried out by the following agencies which work under the umbrella of SHCP:
•Comision Nacional Bancaria y de Valores (CNBV): It is the bank regulator and its stated function is to supervise and regulate financial entities to assure their stability and correct functioning. It focuses on the Banking, Financial and Securities institutions. In addition to commercial banks, it supervises the government-run development banks, credit unions, and most deposit and credit institutions, as well as brokerage houses, mutual funds, stock markets, and other organizations involved in securities markets.
•Comision Nacional de Seguros y Fianzas (CNSF): Oversees insurance companies, trust companies and certain other institutions. It is relevant to some of the larger commercial banks mentioned in this report which operate insurance services.
•Comision Nacional del Sistema de Ahoro para el Retiro (CONSAR): Oversees retirement savings. It is relevant to some of the commercial banks mentioned in this report which operate asset management companies.
In the case of the insurance market, Mexico is quickly emerging as a key market for U.S. companies largely due to the opportunities for foreign investors and improving regulatory oversight. Generating more than 25 percent of the total premiums in the region, Mexico is the second-largest insurance market in Latin America, behind Brazil. Currently, 3 foreign and 2 Mexican insurance companies that comprise almost 59 percent of the market dominate the insurance market in Mexico. Yet insurance has experienced low penetration in Mexico, representing only 2 percent of the total GDP of Mexico, much smaller than the insurance market in the United States as well as other Latin American countries such as Brazil, Chile and even Colombia. Nevertheless, small niches of insurance products, such as educational, transportation and natural hazard products exist in this growing market and offer substantive opportunities for U.S. firms.
Market Research
Overview of the Mexican Insurance Industry Market Opportunities for US Firms
Mexico is the second largest insurance market in Latin America after Brazil. At the end of 2007, the insurance industry was comprised of 95 companies, six of which are part of larger financial groups and 46 foreign subsidiaries with authorization to operate in Mexico. Foreign subsidiaries enjoy 59% market share of direct premiums while Mexican-owned insurers have 41% of the market. According to AMIS (Mexican Association of Insurance Services), insurance services have until now experienced low market penetration in Mexico, representing only 1.9 percent of the total GDP, in comparison with England, which represents 12%, U.S.A. 9% and 4% in Chile. Nevertheless, the insurance sector represents a huge potential market for several small, niche insurance products, such as education, transportation and natural hazard products, which offer substantive opportunities for U.S. firms in this growing market. To obtain the full text of this report please contact us.
Financing for SME's in Mexico
Although Mexico is the United States' s second largest trading partner, the lack of financial options for small and medium sized enterprises (SMEs) is often cited as the primary obstacle for U.S. companies selling to Mexico. The Government of Mexico recognizes the importance of SME's, which produce 50% of Mexico GDP, and encourages financial institutions to provide more favorable financing terms to these companies.
This is good news for U.S. firms since their Mexican partners and clients will be more likely have access to financing to buy from the United States.
It is very important to recognize that many Mexican SMEs are typically very small family-owned businesses. Most of them have between 1 and 9 employees. In the U.S. context, these are micro-enterprises. To obtain the full text of this report please contact us.
Non Banks in Mexico
Since the implementation of the North American Free Trade Agreement (NAFTA) in 1994, opportunities and diversity in the credit markets of Mexico have increased tremendously. Due in part to said agreement, a whole new way of lending has been created; one that is more in line with "Nonbank banks" in the United States. A never-before-seen category of consumers now has access to credit in Mexico. Prior to the advent of a non-traditional banking sector, acquiring financing for an automobile, home or business was out of the question for many. Currently, this industry is growing to reach more and more Mexicans, regardless of credit history. The market is still young; yet, it is becoming increasingly specialized and efficient. Most importantly, the legal environment for this industry is uncharacteristically open to the participation of foreign firms. U.S. financial institutions interested in participating in this market by way of lending or investing will find relatively few complications in Mexico. To obtain the full text of this report please contact us.
Equipment Leasing Services
The equipment-leasing sector is an important source for financing equipment in Mexico. The development of the Mexican equipment-leasing sector complements the banking sector and improves the ability of Mexican companies to acquire equipment from American suppliers. The proximity of the two countries and growing need for alternative forms of financing, make leasing a viable option for Mexican firms wanting to import equipment from the U.S. Although the leasing market in Mexico is not as large as in the U.S. it is a growing market. Equipment leases are needed throughout numerous sectors, including airplane, medical equipment, transportation equipment, computer equipment, and office equipment.
Further Information, Comments or Questions
If you wish to write us regarding these reports, please contact Sylvia Montaño, Trade Specialist on Financial and Insurance Services in Mexico Sector of the US Commercial Service Mexico City Office.