Why did Nafta have no effect on banking?

By Felix Salmon
June 9, 2010
said that it was making a long-term strategic investment, both in Mexico and in the Latino market in the US:

" data-share-img="" data-share="twitter,facebook,linkedin,reddit,google" data-share-count="true">

When Bank of America bought 25% of Santander’s Mexican operations in 2002, it said that it was making a long-term strategic investment, both in Mexico and in the Latino market in the U.S.:

“The Mexican-American population is the fastest growing segment in the country and in most of our major markets,” said Kenneth D. Lewis, Bank of America chairman and chief executive officer. “We are excited about the opportunities this will provide us and know we will benefit from Santander’s expertise in serving the Hispanic market…

With approximately 75% of the U.S. Hispanic population living within the Bank of America footprint and along the Mexican border, the Santander expertise will be invaluable to improving banking products used by the Hispanic community. “This investment demonstrates how seriously Bank of America takes its commitment to the Hispanic community,” said Rivera. “This enables us to strengthen existing relationships and build new ones in both the United States and Mexico.”

It didn’t take long, after the deal closed, for BofA to unveil its excellent SafeSend remittance product, which allows people with a Bank of America checking account to transfer money at no charge into a Santander account in Mexico.

So now that BofA has unwound the deal, selling the stake back to Santander at a $900 million profit, whither the prospects for serious banking links between the U.S. and Mexico? The big Mexican banks own some small banks in Texas and California, but the biggest consumer banks in the U.S. — BofA, Wells Fargo, and Chase — have essentially no presence in Mexico at all. Citigroup does: it owns the biggest bank in Mexico, Banamex. But Citi is weak at banking the Hispanic community in the U.S., and it has gone to great lengths to keep Citibank and Banamex at arm’s length from each other. (Mexico is the one country in the world where most Citigroup banking is done under a non-Citi brand name.)

I guess we’ll see how long the SafeSend relationship between BofA and Santander lasts, now that BofA has no financial interest in Santander Serfin any more. But it is striking, to me, how little cross-border activity there has been in the banking system since Nafta arrived. Canada’s TD Bank has taken advantage of the financial crisis to make some opportunistic acquisitions in the U.S., but in general the three countries are still very separate, banking-wise. I don’t think anybody would have predicted that, in 1994.

Comments
6 comments so far

I would argue this is more a US/Mexico thing than US/Canada. You mention TD, but remember that Bank of Montreal owns Harris in Chicagoland and RBC bought Centura of North Carolina a few years back and has added other community banks in the SE.

Posted by Lou_W | Report as abusive

You forget BBVA.

Posted by IbexSalad | Report as abusive

Felix, branches of foreign banks do not have the same statute as domestics banks and very few of them made inroads in consumer banking (except for HSBC, mostly in the West).
http://en.wikipedia.org/wiki/Banking_in_ Canada#Regulation

Posted by lemarin | Report as abusive

Scotiabank owns a fairly large Bank in Mexico but I don’t know if it was bought post NAFTA. Scotia is also all over Latin America.

Posted by Schooner | Report as abusive

Since NAFTA hasn’t done diddly for individuals and small businesses on either side of the frontier, it’s hard to imagine what significant growth in international transfers might have so arisen. Obviously the banks didn’t exactly lose money on NAFTA which, while probably part of the incentive for major corporations to back it, is about all one is likely to learn from the NAFTA situation at this point.

Posted by HBC | Report as abusive

Is it me or are Mexico’s two biggest banks foreign owned: Banamex is Citi (American), Santander is Spanish… maybe that’s why they don’t make a footprint in America – they themselves are the footprint from elsewhere.

Posted by CDNrebel | Report as abusive
Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/