Mexico’s financial system is safe from the problems with liquidity facing banks in other countries after the collapse of Silicon Valley Bank because its lenders have weathered crises before and have behaved in a cautious manner, the country’s finance minister said.
Mexican banks haven’t overextended themselves and its central bank didn’t cut rates close to zero and then keep them there, helping to insulate Mexico to some degree from the issues rattling investors in other parts of the world, Rogelio Ramirez de la O said in an interview Thursday with El Financiero Bloomberg TV.
“We don’t have to worry about systematic contagion. I don’t doubt that some Mexican bank has links to that bank or another that has problems in the US or Europe, but the whole Mexican system does not have an issue,” he said in Merida, in the southeastern state of Yucatan.
Mexico’s Finance Ministry has had to adjust to rising interest rates as Banco de Mexico, the central bank also known as Banxico, has pushed up borrowing costs to a record high 11%. The median estimate of economists surveyed by Bloomberg expect Banxico to raise rates at its next two meetings.
Ramirez also said that higher interest rates in Mexico had weighed on the government budget, but that officials had been able to cover the expense.
“It does affect us, but until now it’s been a cost that we have absorbed within the budget without having to look for additional financing beyond the budget approved by the congress,” he said. “I can’t say it was a success, but it’s well absorbed.”
Mexico’s top policymakers and bankers are gathering Thursday and Friday for their annual convention, the country’s top financial event, amid heightened volatility in global markets since Silicon Valley Bank collapsed last week and a crisis of confidence hit Credit Suisse Group AG.
Yet Mexico’s own history with past financial crisis, including the damaging devaluation triggered by the Tequila crisis in 1994, has led to higher regulatory standards on the banking system that gives it less exposure to external shocks.
“We have one kind of regulation that applies to all banks, and under that regulation it’s clear that the Mexican banking system is well capitalized, resilient, and does not face a risk similar to what happened to those other banks,” Irene Espinosa, a board member at Banxico told reporters at the same event.
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