Foreign and Domestic Bank Participation in Emerging Markets: Lessons from Mexico and Argentina

[...]This article contributes factually to the debate over theopening of emerging markets to foreign participation byexploring the experiences of Argentina and Mexico—two markets that exhibit a significant degree and duration offoreign bank activity.We begin our analysis by presenting the opposing views onthe role of foreign-owned banks in emerging markets.1 Next,we argue that ownership per se is not a reason to expectdifferences in the lending patterns of domestic and foreignbanks; instead, these would arise because lending objectives,funding patterns, market access, and balance-sheet health mayvary. We then review liberalization efforts in Argentina andMexico in the 1990s and examine local lending patterns byforeign- and domestically owned local banks, including stateowned banks. Our goal is to document these banks’ relativestability in lending to different client bases and to examine thecyclical properties of such lending. Throughout, we base ouranalysis on published quarterly loan data for individual banksin Mexico and in Argentina in the 1990s. We look at totallending, personal/consumer lending, mortgage lending, andthe broad remaining group that includes commercial,government, and other lending.[...]