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A. Puyana - The Impact of Trade Liberalization and the Global Economic Crisis on the Productive Sectors, Employment and Incomes in Mexico
3.8.3 Inefficiencies of the Mexican financial system The preceding account of Mexico’s recent growth performance could partly be explained by weakness in its financial system. Given the country’s level of development, the Mexican banking system and stock market are underdeveloped. The financial system’s weakness became even more evident under the new strategy than in the previous one. Once the private sector was “designated to take the lead in investing”, the financial system was not prepared to perform its intermediating role.
This resulted in a misallocation of savings in projects and assets with low returns, which manifested in reduced productivity growth. The emphasis on the benefits of liberalizing capital flows has made the Mexican financial system more closely linked with world capital markets and rendered it even more vulnerable and less capable of completing its task of allocating resources among investors. The Mexican financial system has turned to finance real estate and consumption of durable goods rather than the productive sector.