Mexican Parties Introduce Banking Overhaul to Spur Lending

Mexico’s three biggest parties joined with President Enrique Pena Nieto to present a bill to spur bank lending and faster growth in an economy where credit availability lags the rest of Latin America.

The proposal seeks to give banks more incentives to lend rather than invest, providing Mexicans better access to credit at lower costs, and doesn’t attempt to impose lower interest rates by decree, Pena Nieto said. The legislation, which will be sent to Congress today, would increase the role of development banks in helping expand credit, he said.

“Macroeconomic stability, the soundness of our financial institutions and the will to reach agreements between the principal political forces in this country opens a unique opportunity for us,” Pena Nieto said in a speech in Mexico City today. “It’s the ideal moment for a comprehensive review of the legal framework for the financial sector and to make responsible lending an important engine for economic development.”

The lending proposal is the latest in a line of overhauls since Pena Nieto’s election last July. Congress has passed a labor reform that allows for hourly contracts as a way to boost productivity, and, using the Pact for Mexico between Pena Nieto’s Institutional Revolutionary Party, the Democratic Revolution Party and National Action Party, approved education and telecommunications overhauls.

Mexico’s economy is forecast to grow 3.5 percent in 2013, exceeding Brazil’s expansion for a third year, according to the median forecast of economists surveyed by Bloomberg. Still, commercial bank lending is equivalent to just 19 percent of gross domestic product, half the rate of Brazil and the lowest of any Latin American nation, according to the most recent comparable data compiled by the International Monetary Fund.

Grupo Financiero Banorte SAB, Mexico’s third-largest bank by outstanding loans, dropped 2.6 percent to 91.47 pesos in today’s trading. Mexico’s two largest banks are units of foreign companies.

Grupo Financiero Santander Mexico SAB, the Mexican unit of Spain’s biggest bank, gained 2.4 percent to 42.06 pesos. Banregio Grupo Financiero SAB, which sold shares in an initial public offering in 2011, added 0.1 percent to 69.87 pesos.

The peso strengthened 0.3 percent to 11.9891 per U.S. dollar at 3:17 p.m. in Mexico City.

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