The recent purchase of Mexican bank Grupo Financiero Banamex-Accival by U.S.-owned Citigroup has several implications for the economic landscape south of the border, but also holds promise for businesses here in the San Diego region as well.
According to Hispanic Business magazine, the buying power of Hispanics in the United States has skyrocketed from $191.7 billion in 1991 to an estimated $492.5 billion just 10 years later. The Banamex purchase may boost that figure even more.
South of the border, economic forecasts are bright too. The peso is strong and Mexican business is growing through the globalization of the marketplace and technology. I remember not long ago when several Mexican business owners I know experienced major economic challenges because of the ailing Mexican economy.
The transaction between Citigroup and Banamex demonstrates a recognition that Mexico has recovered from the banking crisis that began with the collapse of the peso in the mid-1990s. It also shows that Citigroup has confidence in the potential for lending business in Mexico.
At a press conference announcing the purchase, Robert E. Rubin, the Citigroup executive who put together the deal, called it an example of Citigroup’s commitment to Mexico and belief in the further integration of the U.S. and Mexico economies.
– Economies Are Integrating
This integration is evidenced by the many Mexican-owned businesses that are sprouting up throughout the United States , California and Texas in particular. Recently, Mexico’s supermarket Gigante launched its chain in Los Angeles, hoping to capture the Hispanic market. FAMSA furniture chain and Bimbo bakery have also opened in the United States because of the increasing numbers and wealth of the U.S. Hispanic population.
Citigroup said in addition to Mexico’s lending potential, the recognition of the Banamex name among U.S. Hispanics was attractive. Citigroup hopes to reach the 21 million people of Mexican descent who live in the United States.
Here in San Diego, the business community stands to gain. Because of our proximity to the U.S.-Mexico border, San Diego sees a number of small, Mexican-owned businesses.
Economic development specialists in Chula Vista say restaurants, beauty salons and appliance and auto repair shops are among the most popular Mexican-owned small businesses. The recent bank transaction will offer expanded lending opportunities to these businesses.
This will strengthen San Diego’s Hispanic business community in several ways. With Citigroup’s purchase of Banamex, economic borders are virtually erased. More Mexican-American businesses will be able to establish ties south of the border.
– Firms May Expand North
Mexican-owned businesses will be able to expand into U.S. markets, which stimulate the economy on both sides of the border.
Currently, loans represent just 10 percent of Mexico’s gross domestic product whereas they are 72 percent of that GDP in the United States. The greater potential for lending business means more entrepreneurship because people will have access to an expanded opportunity for business loans.
(Time once was when big companies were the primary recipient of these types of loans.)
San Diego companies will be able to do more business with Mexico, especially those that need to quickly transfer funds between countries. Businesses can access their funds more quickly and efficiently, using technology such as the Internet for money transfers.
This saves time in transit, thereby allowing more time for funds to accrue interest. Deposits that are recorded sooner help businesses maximize earning and assist with cash flow needs.
Citigroup executives are optimistic that their recent purchase of Banamex will prove to be empowering to Mexican and U.S. Hispanic businesses. With the growing need for loans and financial services, this should be a boon for the Hispanic community.
Saiz is the managing partner of Calderon, Jaham & Osborn Certified Public Accountants and Consultants, which has offices in San Diego and Imperial County.
