There has been an ongoing debate regarding the consequences of foreign ownership in the banking sector in Mexico. Some participants in the public discourse argue that foreign ownership earnings leave the country in the form of dividends, leaving little, if any, for reinvestment. Another argument claims that foreigners are not interested in economic development in the country and thus restrict credit, especially to small and medium-size companies.
In this study (read Spanish version), we first analyze the theoretical underpinnings. According to Becker’s theory of discrimination, if one entity were to discriminate, the competition would take advantage of the money left on the table and would eventually take the discriminating entity out of the market or, at least, the entity would show subpar performance. In other words, discrimination in giving credit in the country would go against the best interests of the foreign-owned bank.