Why did Nafta have no effect on banking?
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.