Volume 44, Number 172,
January-March 2013

Crisis, Profit-Seeking and Neoliberal Intervention in the Mexican Banking System: (1982-1999), Irma Sandoval, Center for Studies Espinosa Yglesias, Mexico, 2011, 345 p.

In her work, Crisis, Profit-Seeking and Neoliberal Intervention in the Mexican Banking System: (1982-1999), Irma Sandoval demonstrates the need for a new conceptual proposal of how to address and study the Mexican financial system. Together with this rich and inevitably theoretical discussion, the book also is a broad historical reconstruction of what happened in our country starting in the 1960s and up to today. The author divides this long period into three stages, with a strong emphasis on the phase between 1982 and 2000.

As a backdrop for her analysis, Sandoval talks about the urgent need to modify the structure and rules that govern financial institutions in Mexico and in the world. This text focuses on the formation, application and allocation of national savings: What are the conditions needed to maintain the value of productive activities in our country and to generate new value? What role should financial intermediation play in the lives of our population in the future? And, what is the balance of thirty years of economic stagnation and growing inequality?

Dr. Sandoval’s discussion recreates and develops these thirty years of neoliberal policies in the banking system and goes far beyond mere reiteration. She provocatively analyzes and locates the initial impulses to apply the current model in the Ministry of the Treasury and Public Credit at the beginning of the 1970s and presents relevant supporting hypotheses. This work demonstrates the path that has led banking and financial systems to fail in reaching their own neoliberal goals: the system has never managed to reduce costs, is highly inefficient, prevents access to their own services for the majority of economic agents, increases the margin of intermediation and above all, has required intervention time and again to be rescued later due to their own failures and largely unavoidable practices of corruption and profit-seeking, which occur in both the financial and banking realms (self-allocation of loans, preferential rates, related credit, overlap, opacity, etc.)

This book is a mandatory reference for anyone seeking to understand one of the most serious problems of our day. It neither denies nor rejects the transcendence of the neoliberal economic model. However, it does propose that the theory on which this paradigm is constructed is at odds with its own daily practices. In reality, the neoliberal discourse is a peculiar way to present Economic Policy: the orthodox theory of economics, supposedly “pure,” is actually political economics, and betrays itself by pretending to be something it is not. Despite its supposed apolitical natural it has developed and affirmed a lasting political project on a broad spectrum that in the history of Mexico has been projected through the redefinition and profound alteration of the economic and political patterns of the so-called “development” period.

In contrast to formal models with abstract assumptions of market dynamics, Sandoval recues the methodology of case studies, using a configurational and comparative perspective with a historical approach that also posits the theoretical relevance of performing a counterfactual analysis that allows us to understand what the results would have been if a different path had been taken. The failure of theoretical models proposed by neoliberal technocrats with the goal of taking apart the body of economic policy does not reside in a lack of understanding or wisdom when applying these models, but rather in the fact that neoliberalism itself is the theoretical discourse of political teams and interest groups that falsely claim to be technocrats but really have clear political and economic interests. The model is a clear oxymoron: in the same way that it would be irrational to talk about warm ice or a fire without fuel or dry water, the existence of an apolitical political economy is a paradox.

Thus, before formulating algorithms or formal quantitative relationships, clarifying what has happened in the years of study must begin with determining which interest groups have really led the trends that prey on social wealth by monopolizing the financial markets and foreignizing the banking industry in the country. That is why Sandoval Ballesteros proposes the theoretical-interpretative model to determine who acted and as a consequence, who benefited, to later explain the concrete technical measures taken.

The result is an impeccable academic essay, not tied to any specific political period, but still contributing a critical intervention that seeks to impact the current course of society, especially for the knowledge of future generations that will have to overcome the failure of a model that was imposed while they were growing up. The text is far from formal or dull, but nor is it written only for this moment. However, given the rigor of the proposed reasoning and the explicit theoretical position adopted to construct its arguments, this reading is obligatory and cannot be missed.

The keen and clear details in the explanations and data analysis, figures and tables and recording of significant historical facts are a great addition to the original empirical research. For example, the book highlights the first rescue of the López Portillo bank, the conformation of new financial groups at the beginning of the 1980s, the legal changes and adjustments made in reaction, how the new financial intermediaries directed national savings towards speculation (the so-called “ casabolseros,” a term for stockbroker from Miguel de la Madrid), how Salinas de Gortari delivered the new banks to speculators and adventurers on a silver platter, the uncontrollable corruption in banking privatizations and the opaque and illegal issue of Fobaproa-ipab with Zedillo. This broad historical tour is built on theoretical assumptions that demonstrate that economic motives do not impose changes in the political sphere, but rather conspicuous political groups have managed to leave their mark on economic life, and have gone to the extreme to make these changes seem like the only viable and necessary options. This text at times is a difficult read, due more to the episodes told in gruesome detail than to a lack of clarity or a dry style; on the contrary, anyone who reads the entire text will have the satisfaction of having read a book with complete, well-reasoned arguments, firmly grounded in empirical data.

The most illuminating part of the book reviewed here can be summarized as follows: if the democratic crisis of the golden years of the old paternalistic regime was what gave rise to the substitution of an authoritarian populist regime and opened the doors to the implementation of the neoliberal model, today, the fight for democracy will once again pave the way to take the reins and regulate the financial system in favor of national development in the new global context. This would reduce inequality and begin to once again channel capital flows towards productive intermediation, diverting capital away from merely speculative fields.

Juan José Dávalos
Department of Economics — unam
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Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 192, January-March is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
CP 04510, México, D.F. Tel (52 55) 56 23 01 05 and (52 55) 56 24 23 39, fax (52 55) 56 23 00 97, www.probdes.iiec.unam.mx, revprode@unam.mx. Journal Editor: Alicia Girón González. Reservation of rights to exclusive use of the title: 04-2012-070613560300-203, ISSN: pending. Person responsible for the latest update of this issue: Minerva García, Circuito Maestro Mario de la Cueva s/n, Ciudad Universitaria, Coyoacán, CP 04510, México D.F., latest update: Feb 23th, 2018.
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