Latin American Banks and Euromarkets: A View on the Process of Early Bank Globalization from the Periphery

1 Introduction

Global banks are a salient feature and central actors of world capital markets and the current international financial infrastructure. Historically, the process of the modern bank globalization started in the late 1950s after the collapse of international finance during the Great Depression and the reorientation of banking towards domestic markets, to develop in earnest since the last third of the 20^th century.^[1] With the end of Bretton Woods and the softening of capital controls in the early 1970s, commercial banks became increasingly engaged with a large variety of business at an international level ranging from trade finance and foreign exchange operations to sovereign lending and the provision of financial services to multinational companies.^[2] This process of internationalization came along with an expansion in the network of offices overseas and a rising presence of foreign banks in the major word financial centres and crossborder integration of banking transactions.^[3]

At the heart of the re-emergence and rapid expansion of international banking during the early years of modern financial globalization were the Euromarkets. Initially concerned to the accumulation of substantial pools of US dollars in London since the second half of the 1950s, the development of the so-called Eurodollar market and broader foreign currency deposits by commercial banks in major world financial centres became the cornerstone of foreign banking and international finance.^[4] At the outskirts of national financial regulatory frameworks and monetary controls, the Euromarkets offered a flexible platform where banks could access liquidity and foreign exchange in the Eurocurrency wholesale money markets and engage in international operations and the provision of financing through the Euroloan and Eurobond markets to domestic and international clients at a global level.^[5] The rapid growth of external finance and the Euromarkets were the pivotal issues of enhanced financial integration and capital flows among all major developed economies. Moreover, this phenomenon extended its influence to the developing world and financial institutions operating at the fringes of the system.

Indeed, although largely concerned with banks and financial systems of industrial countries at the core of the international financial system, bank globalization also prevailed in developing countries. As the Euromarket became awash with dollar liquidity and international business opportunities surged after the oil shock of 1973, commercial banks from emerging economies turned into foreign finance and increasingly expanded their operations in the world capital markets.^[6] In particular, through stakeholder participation in consortium banks as well as their own banking offices in main international financial centres, leading public and private sector financial institutions from Latin American and other developing regions in Asia and Eastern Europe went overseas and actively participated in Euromarket activities alongside their Western European and North American counterparts.^[7] Yet, while there has been a multitude of research on the strategies and forms of globalization of the world leading banks and banking sectors from advanced economies, very little is still known about how this process took place in the periphery and the challenges it entailed.

This article is concerned with the international expansion and participation of Latin American banks in the Euromarkets. What was the extent and scope of bank globalization from different countries across the region? Who were the main actors and what was the nature of their international operations? What were their connections with German banks? To answers these questions, the article looks at the overseas presence of Latin American banks and the enlargement of their banking offices in the world’s leading international financial marketplaces, namely London, New York – and other US cities, and Caribbean offshore centres. To do so, I draw on The Banker magazine’s reviews of Foreign Banks in London and New York, which systematically tracked the name, location, legal status and number of staff members of the foreign banking offices on a year basis, along with balance sheet data from the Federal Financial Institutions Examination Council’s (FFIEC) Report of Assets and Liabilities of US Branches and Agencies of Foreign Banks (002 Call Report) and the Bank of England’s archive. Additionally, with a view to complement the assessment with other forms of bank internationalization, I also rely on the IMF’s International Financial Statistics information on foreign assets and liabilities of the domestic banking sectors at an aggregate level and secondary sources and case studies from national historiographies. While the focus of the article lies mainly on the expansion of Latin American banks on the world leading financial centres from where they conducted the bulk of their Euromarket activities, it also highlights the points of contact and collaborations with leading German banks and their presence in financial marketplaces in Germany as part of this process.

The article shows that the globalization of Latin American banks during seventies was a regional phenomenon, although the spread and nature of the process varied across countries and institutions. Between 1973 and 1982, when massive amounts of foreign capital flew into the region as part of the petrodollar recycling process that developed in the Euromarkets, the number, range, and business volume in the world capital markets of financial institutions from a growing number of countries across the continent flourished. Brazil, Mexico, and Argentina, the three most powerful economies with the biggest banks and financial systems of the region, were – in that order – the countries with the greatest international banking presence and involvement with foreign finance. The United States – New York in particular, and, to a lesser extent London, were the main destinations and the central platforms for most of their international business, but they were also operating from the offshore banking centres of the Caribbean. Although less important, there was also Brazilian, Mexican and Argentinean banking presence in Germany, especially in Frankfurt, and joint business with German banks in the Euromarkets and Eurolending operations. Bank and banking systems from other important economies, such as Chile, Venezuela, Colombia, among others, fit a similar trend, although in the case of Colombian banks the operational base for international banking was mainly Panama.

An examination of bank globalization process in Latin America is important for reasons that go beyond the region. First, international lending and capital flows from the core to periphery countries in the developing world was arguably the major driving force of international banking during this period, and Latin America was the region at the heart of this process. Second, and partly because of the events alluded in the previous point, the financial problems and external indebtedness difficulties that Latin American countries confronted after the outbreak of the international debt crisis in 1982 represented a major threat to the world financial system and the institution leading the process of bank globalization and cross-border financial integration in advanced economies. Finally, although Latin American banks were certainly a minority group and relatively marginal players in world capital markets and international banking, their foreign operations were largely concerned with financial institutions and money markets in the world financial centres creating thereby vulnerabilities for the banking systems of developed countries. Indeed, the liquidity problems that some developing countries banks confronted in the international money markets in the wake of the crisis were a major concern for central bankers and financial authorities of the G10.^[8]

The rest of the article is structured as follows. The first three sections document and assess the extent of the expansion of Latin American banks in the three main destinations and operational bases overseas, namely London, the Unites States, and the Caribbean offshore banking centres. Section four examines the nature of the involvement, and variety of business, of Latin American banks in the Euromarkets, and with foreign finance more broadly, across the different institutions and countries. The fifth section looks at the effects of the financial and debt crises of the early 1980s in the operations of Latin American banks in the international capital markets and the process of bank globalization they had been through. The last section concludes with a discussion about the importance of the findings beyond the scope of this study and its implications for further in-depth studies that want to look even more closely at the businesses of the banks in the Euromarkets and the role of German banks.

2 London and the Eurodollars

London, positioned at the heart of the Euromarkets, was a key hub for international banking. As the market developed and the UK banking system became flooded with dollar liquidity, especially after the oil shock of 1973 and the petrodollar recycling process gained traction, the arrival of foreign banks in London surged. While about 113 foreign banks were represented in London in 1967, they more than doubled to 267 in 1973 and reached a peak of 449 in the wake of the international financial fallout of 1982.^[9] Initially limited to a group of leading American and European banks, the geographical spread of these banks increasingly broadened and by the early 1980s institutions from over seventy developed and developing countries from all around the world were operating in London directly with their own offices or through stakes in consortium banks. As of end 1982, the business volume of foreign and consortium banks in the UK was £ 326,1 billion, an amount representing as much as 60,9 percent of the total assets of the entire British banking system.^[10]

Latin America was part of this move and a strong contingent of banks from the region landed in UK during this period. Within a context of progressive liberalization after decades of financial repression in their domestic economies, leading commercial banks and financial institutions increasingly engaged with foreign finance and set up for business in the City of London.^[11] Figure 1, which plots the location and size (measured by the number of staff members) of the banks, illustrates the extent of the expansion, which occurred in earnest towards the end of the 1970s and the early 1980s. As of 1973, five Latin American banks from four different countries had banking offices in the City. Banco de Galicia and Buenos Aires, which had set up in 1969, was the oldest Latin American banking office in London and along with Banco de la Nacion, both from Argentina, and Mexican Banco de Comercio were the smallest ones with a staff of three people the first two and five the later. Banco do Brasil, which had opened its London branch in 1970 and had 31 employees by 1973, had the largest office followed by the Havana International Bank from Cuba with a staff of approximately 20 persons.

Fig. 1

Evolution of Latin American banking offices in the City of London between 1973 and 1982. Source: Foreign Banks in London, in: The Banker (several issues).

Relatively discreet in the early 1970s, the presence of Latin American banks in London expanded vigorously over the following decade both in number and size. While by 1977 four new Brazilian banks, plus two from Mexico and one from Venezuela had added to the group of Latin American banking offices in London, their number almost triple five years later. By 1982, a total of 29 Latin American banks from nine different countries, which employed over 420 people at an aggregate level, had their own branches or representative offices in the City of London. With 12 banking offices, four of which had a branch license while the remaining eight were representative offices, Brazil was the country with the largest presence (see Table A1 in the Appendix). In terms of staff, Banco Real had the biggest branch with a total of 80 employees, followed by Banco do Brasil with 76, Banco do Estado de Sao Paulo (Banespa) and Banco Mercantil de Sao Paulo with 35 and 17 each respectively.^[12] Mexico came at the second place with six financial institution in London, of which Banca Serfin, Banco Nacional de Mexico (Banamex), Banco de Comercio (Bancomer) and Multibanco Comermex had branch statute and employed 24, 23, 19 and 15 persons respectively. Among the four Argentinean banks, only Banco de la Nacion operated a branch (with 31 employees), while the other three, as well as the rest of the Latin American banking offices from Colombia, Peru, Chile, Uruguay, and Venezuela, were representative offices.^[13] The legal standing of the banking offices is a relevant factor because it determined the type of activities they were allowed to engage with. While a branch licence gave authorisation to carry out regular banking services and access the London Eurocurrency market, representative offices could not conduct direct operations and were only able to work through their network of correspondents and partners in London and/or referring business back to parent banks or head office in their home countries.

Although no systematic records on the operations of Latin American banks in London exists, archival records from the Bank of England provide some estimative figures of business volumes. Data gathered by the Financial Statistic Division on the balance sheets of the Brazilian, Mexican and Argentinean branches by the time of the debt crisis shows that as of mid-1982 they accumulated assets and liabilities for US$ 8’289 million at a consolidated level.^[14] US$ 5’182 million or 62.5 percent of this amount corresponded to Brazilian branches, of which Banco do Brasil was by far the largest with as much as US$ 3’874 million in assets (74.7 percent of the group) followed by Banco Real, Banespa, and Banco Mercantil de Sao Paulo with US$ 664, 507, and 137 million respectively. The four Mexican banks had total assets and liabilities for US$ 2.1 billion, of which Banamex accounted for U$S 888 million and Bancomer, Banca Serfin and Multibanco Comermex for US$ 523, 401, and 310 million respectively. As for Banco de la Nacion, the only Argentine branch and the second largest Latin American bank in London after Banco do Brasil, the business volume reached US$ 985 million.

The fundamental cause for Latin American banks to settle in London was to participate in the burgeoning Euromarket. Operating outside of national financial regulatory frameworks, the Euromarkets provided banks with a more flexible, constraints-free platform from where to access to a large interbank wholesale money market and engage in international lending to corporations, governments, and other types of foreign financial activities and borrowers.^[15] In the case of banks from Less Developed Countries and Eastern Europe, although with a fairly modest participation within the overall London market representing about 6-7 percent of the Eurocurrency operations, an important role assessed by the Bank of England was their involvement in the interbank market to act as a channel for funds to and from their parent countries. However, as stated in a report from the Financial Statistic Division, “LDC and Eastern European banks do not in aggregate rely more heavily than does the market as a whole on the London interbank market to fund themselves.”^[16] In the context of severe external imbalance problems in their home countries, concerns that flows through this channel may have been used in financing the balance of payments deficits were important.

Apart from their own banking offices, Latin American banks were also active in London through stakes in consortium banks. Between 1972 and 1974, four consortium banks with Latin American partnership, the Euro-Latin American Bank (Eulabank), the European Brazilian Bank (Eurobraz), the Libra Bank, and International Mexican Bank (Intermex), were created in the City. The involvement of Latin American banks in consortium banking was part of a trend among a handful of developing country financial institutions that got involved in the international financial community and the Euromarkets at that time. As reported in the financial magazine The Banker, client nations of the international money and capital markets had been increasingly promoting, through government-controlled domestic banks or private sector banks, the creation in London of consortium banks, in partnership with European and North American banks, specialized in international banking to local customers.^[17] Thus, in addition to those owned by large international banks, there were a number of other consortium banks that had participation of banks from borrowing countries themselves.

Table 1 provides information on the ownership composition of the four Latin American consortium banks. Among them, the Libra Bank, which had the lowest share of Latin American partnership with Brazil’s Banco Itaú and Mexico’s Bancomer owning 8 percent each, was the biggest with assets of £ 1’518.2 million in 1982. Eurobraz, created under the initiative of and majority owned by Banco do Brasil with 31.9 percent of the shares, had £ 766 million in assets and was the second largest.

With assets of £ 692.6 million, the Eulabank came in the third place. It was 50 percent European and the other 50 percent belonged to 10 Latin American banks from nine different countries, to which Banco del Estado de Bolivia would be added in 1979. The bank was founded to strengthen the economic ties between Latin America and Europe and its main focus was on medium and longterm Eurocurrency loans, project finance, and Latin American trade finance. Finally, Intermex, which was majority owned by Banamex with 38 percent of the shares, had assets of £ 355.6 million. Overall, the central purpose of these banks was “to act as a go-between for domestic borrowers, including their home office, and to raise money [...] in world markets for their home countries.”^[18]

As joint-business undertakings with world leading international banks from industrial countries, these Latin American consortium banks involved the participation of leading German financial institutions. There was German banking presence in the fourth Latin American consortiums and Deutsche Bank, which was actively engaged with the Euromarkets, was the bank the most heavily involved as shareholder in three of them.^[19] As Table 1 shows, it had direct stakes in the European Brazilian Bank and Intermex with 13.7 and 7.25 percent of the shares respectively, and indirectly in Eulabank through the 5 percent share that were in the hands of the Deutsche Südamerikanische Bank. Apart from Deutsche Bank, three other German banks had ownership in these endeavors: the Westdeutsche Landesbank with 10.6 percent shares of the Libra Bank, and the Dresdner Bank and the Bayerische Hypotheken with 5 percent each in the Eulabank. Germany was indeed one of the countries, along with Switzerland, with the largest bank participation in the Latin American consortiums among advanced economies.

3 New York and the US Capital Markets

During the 1970s, London’s rival international financial centre, New York, also experienced an impressive growth in its foreign banking community. The abolition of the Interest Equalization Tax (IET), along with the expiration of exchange controls in January 1974, made the US capital market relevant once again for foreign borrowers and international banks, which massively increased their presence in the New York marketplace both in terms of their number and business volume.^[20] As of 1978, New York State Superintendent of Banks Muriel Siebert declared that “the number of foreign banks branches and agencies in New York has increased from 52 ten years ago to 143 currently and their assets have risen from $6 billion to more than $56 billion.”^[21] Moreover, by the end of the decade foreign banks directly represented in New York more than double the level of 1973 and reached as much as 255 in early 1982. Japanese, European and Canadian banks were the leading players and accounted for almost 93 percent of the total foreign banking assets, with the remaining 7 percent held by banks from other countries, many of which were from Latin America.^[22]

Although London remained the largest world metropolis of foreign banks, from Latin America New York has historically been regarded as its main overseas banking centre. Indeed, the presence of Latin American banking offices in New York predated their arrival in London, and the pace of their expansion in the US during the 1970s and early 1980s was much stronger than in the UK both in scale and scope. While virtually all Latin American banks operating in London were also present in the US, many of those which had banking office in New York did not set business in the UK. With a representative office since 1929, Banamex was the oldest Latin American bank in New York, followed by Banco Nacional de Descuento from Venezuela, Banco Boliviano Americano, Banco de Credito del Peru, and Banco Real from Brazil which had opened their offices in 1957, 1960, 1963, and 1964 respectively. Other Latin American banks started to arrive in greatest number since the 1950s, but the influx of newcomers from the region became stronger over the following decade, especially in the late 1970s and early 1980s. 21 Latin American banks opened banking offices in New York during the 1970s, but as much as twelve of them arrived only in three years between 1977 and 1979, to which 9 more were added between 1980 and 1981 (see Table A2 in the Appendix).

Figure 2 illustrates the presence of Latin American banks in New York. The chart makes evident the extent to which it was significantly larger than in London both in number and size. As of early 1982, a total of 37 seven financial institutions from ten different countries had banking offices in Manhattan (with a staff of approximately 1’263 employees), the bulk of which were largely concentrated in the Midtown East area (30) while the remainder were downtown in the Financial District (7).^[23] Brazil, with 12 banks that employed 666 staff members, was the country with the greatest representation, and Banco do Brasil and Banco Real were the biggest ones with 250 and 116 employees each followed by Banco do Comercio e Industria de Sao Paulo and Banespa with 70 and 51 respectively. Mexican banks were the second largest group with seven financial institutions, of which Banco Nacional de Mexico and Banco de Comercio were the biggest with a staff of 50 and 45 employees. Among the five Argentinean banks, Banco de la Nacion’ office employed 105 workers and Banco del Rio de la Plata and Banco de la Provincia de Buenos Aires came second with 36 and 35 each.^[24] There were also five banks from Venezuela, of which Banco Union had the biggest offices (43 employees), five from Chile, and one each from Colombia, Ecuador, Peru, Uruguay, and Bolivia of which Banco de Bogota and Filanbanco Ecuador were the largest with 75 and 38 staff members respectively.

Fig. 2

Latin American banking offices in New York City in 1982. Source: Foreign Banks in New York, in: The Banker (several issues).

New York was the primary destination, but the expansion Latin American banks in the US involved, though on a much smaller scale, other regional financial centres that also welcomed an increasing number of foreign banks. Indeed, while New York accounted for approximately 70 percent of US total foreign banking assets in 1980, 23 percent were located in California, 3 percent in Chicago, and there was also significant foreign banking activity in Florida, specially from Latin America.^[25] As of February 1982, 13 out of the 37 Latin American financial institutions in the US were present also in other cities with a combined network of 29 banking offices and approximately 380 staff members outside New York (see Table A2). The bulk of them (10) were concentrated in the State of California (8 in Los Angeles and 3 in San Francsico) and Miami (7), but there were also offices in Houston (4), Washington (4), Chicago (2), Atalanta (1) and Dallas (1). There were five different countries with banking representation outside NY. Brazil’s Banco do Brasil, Banco Real, Banespa, and Banco de Comercio e Industria de SP had the largest network, followed by Mexican banks, namely Bancomer, Banamex, Serfin, Multibanco Comermex and Nafinsa, and then Argentinean Banco de la Nacion and Banco de la Provincia de Buenos Aires with Banco de Bogota and Banco Industrial de Venezuela completing the list. As in London, while many of the US offices of Latin American banks were representative office and could only indirectly operate in the US banking market, those with branch, agency, or subsidiary status were authorized to engage directly with financial transactions.

Table 2 shows the business volume of Latin American banks’ agencies and branches in the US at an aggregate level by nationality and location.^[26] As of June 1982, before the outbreak of the debt crisis, total consolidated assets and liabilities reached US$ 10’206 millions, of which New York accounted for as much as 60.6 percent or US$ 6’217 –there were US$ 8’289 million in London, Los Angeles 22.4 percent, San Francisco 12 percent, and the remaining 5 percent was in Miami and Chicago. Brazil, Mexico and Argentina, the three biggest economies of the region and the countries with the three largest financial sectors, accounted for the overwhelming majority (92.9 percent), with Brazilian banks holding as much as US$ 4’492 million, Mexicans US$ 2’909 million and Argentineans US$ 2’127 million. With a volume of business of US$ 2’498 million, Banco do Brasil was by far the largest Latin American bank operating in the US, followed by Banco de la Nacion Argentina and Mexico’s Bancomer with US$ 1’510 and 1’381 million respectively, accounting together for over half of total assets.^[27] Banamex and Banespa came after with U$S 739 and 653 million respectively, and then Banco de la Provincia de Buenos Aires, Banco Industrial de Venezuela and Multibanco Comermex with about U$S 430 million each. As these names and figures show, there was clear overlap among the leading banks and countries in the American and London marketplaces, but in the US the involvement of Latin American banking institutions was wider and more varied than in the UK.

A main reason why Latin American banks, like other foreign banks, entered the US, and New York in particular, was to access its money market and open a funding channel in dollars. Characterized by its massive size, wide range of money market instruments, high liquidity and extensive international operations, New York was by far the largest money market in the world. In a context of a rising Eurodollar market and a world where the dollar was the major international currency, the banks’ New York offices offered a natural base for their headquarters and international banking network by undertaking wholesale market operations on the spot. “Most international banks,” stated the Euromoney magazine in a special survey on foreign banks in New York, “are interested only in wholesale banking and turn their noses up at the idea of retail banking subsidiaries,” and Latin Americans were no exception.^[28] The wholesale bias of Latin American banks in the US is clear from the legal standing or charter they applied for. Out of the 26 licensed entities in the State of New York, only Banco de Bogota and Filanbanco had bank subsidiary status, and of the remainder were either agencies or branches (see Table A2). Unlike subsidiaries, agencies and branches had limited capacities to engage in retail activities and provide banking services in the US.^[29] A similar pattern is also observed in the other states with Latin American banking presence: as much as 19 out of the 23 licensed banking offices were agencies and branches.

The wholesale nature of the banking activities of Latin American banks is even clearer when looking at the structure of their liabilities. As of June 1982, as much as three quarters of the funding of their agencies and branches in the US at a consolidated level consisted of money markets financial instruments, namely credit balances or direct funding lines from other banks, bank acceptances, and federal funds, although there was significant variability across countries and banks. With as much as 90.5 percent of their liabilities due to the interbank market, Mexican banks were the most reliant on wholesale funding.^[30] The average for Brazilian banks was 71.7 percent, but there was much more heterogeneity than in the case of their Mexican counterparts. Among the three biggest players, for instance, the share ranged from 47.6 percent for Banco Real to 77.6 percent for Banco do Brasil and 85.8 percent for Banespa.^[31] In the case of Argentina, wholesale operations represented about 44.7 percent of the liabilities of Banco de la Nacion, but as much as 82.4 percent for Banco de la Provincia de Buenos Aires. Finally, the figures for Banco Industrial de Venezuela for Banco de Bogota, the other banks with significant volume of business in the US, were 48.1 and 85 percent respectively.

While branches and agencies were the most common institutional form adopted by Latin American banks for setting business in the US, some banks followed other strategies. As in London, consortium banks were also created in New York to take advantage of its money markets though the scope of this phenomenon was much more limited. As of 1982, a total of 32 consortium banks were operating in London, while in New York there were only six of which only one had Latin American, and more specifically Argentinean, ownership.^[32] This was the Argentine Banking Corporation, equally owned by Banco de Credito Argentino, Banco de Galicia y Buenos Aires, Banco Español del Rio de la Plata, and Banca Ganadero Argentino with 25 percent of the shares each. Another legal license employed by Latin American banks, namely Banco de Bogota and Banco Industrial de Venezuela in Miami and Banco de Comercio e Industria de Sao Paulo and Banco Real in Houston, was the Edge Act Office which served to provide interstate services of its parent bank, acting as a lending base for it. Less commonly, some banks could also own subsidiaries by buying an existing US bank, as in the case of Banamex’s acquisition of the Community Bank of San José and the Mexican-American National Bank of San Diego to merge them into the California Commerce Bank between 1979 and 1980, or Bancomer purchase of the Grossmont Bank of San Diego in the Spring of 1982. Others, such Banco de Bogota and Filanbanco from Ecuador, set their own subsidiaries directly.

4 The Caribean Offshore Financial Centres

The rise of international finance and the Euromarkets during the 1970s and early 1980s came along with a rapid proliferation of banking activity in offshore financial centres.^[33] As international banks expanded their networks of branches and agencies in the main world money centres – namely London and New York, they also opened banking offices in financial heavens of the Caribbean and Asia, where the Bahamas, the Cayman Islands, Singapore, Hong Kong, and Panama were the most important ones.^[34] Eurocurrency branches of foreign banks and dollar transactions formed the bulk of the banking community and much of financial activities undertook in these banking centres.^[35] In parallel to the Eurodollars in the City of London and the American money markets in New York, the Caribbean and Asian offshore banking marketplaces emerged as financial heavens that became integrated in the cross-border asset and liability management activities of international banks.

The internationalization of Latin American banks also involved the expansion in offshore financial centres and their main banking outposts were logically in the Caribbean. Although no systematic records have been compiled on the population of foreign banks in offshore banking centres as for London and New York, an examination by individual countries and institutions reveals significant Latin American banking presence and international financial operations. In the case of Mexico, the commercial banks in the US or London were also operating in the Caribbean, namely in the Cayman Islands and the Bahamas. As for June 1982, branches and agencies in Georgetown and Nassau accounted for as much as US$ 2’035.4 and 646.4 million or 26.3 and 8.3 percent, respectively, of the US$ 7’712.9 million of the total assets and liabilities of the international foreign banking network of the six Mexican international banks.^[36] At a consolidated level, the volume of assets in these two offshore centres was larger than in London (U$S 2’122 million) and lower than in the US (US$ 2’909.1 million), though there was considerable heterogeneity across the banks.^[37]

Brazilian banks, the other major Latin American players in the world financial centres, were also directly represented in the Caribbean. Indeed, all twelve banks that had expanded internationally and were operating in New York and/or London had also offshore foreign banking offices there. Although there is no data about the volumes of business they managed, Banco do Brasil, the biggest Latin American bank and the one with the largest international banking network with over sixty offices around the world, had opened affiliates in Panama in 1973, Georgetown in 1976, Nassau in 1981, and unlike its national counterparts was also operating in Asian offshore banking centres.^[38] As for the other Brazilian banks, Banespa among the public banks, and Banco Real, Itau, Banco Comercial e Industrial de Sao Paulo, and Banco Safra among privates banks, had two offices in the Caribbean offshore centres, while the reminder only one.^[39] In addition to their own offices, six Brazilian banks, namely Banco do Brasil, Auxiliar, Banespa, Bamerindus, Banco do Nordeste and Unibanco, had stakes in the Banco Latinoamericano de Exportaciones (BLADEX), a Panama-based consortium bank created in 1977 with the main goal to promote and finance Latin American exports.^[40]

The presence of Argentina banks in the offshore banking centres of the Caribbean is more difficult to track from extant secondary and published sources, but the country’s leading institutions were also operating there. Banco de la Nacion, Argentina’s main international bank, had the strongest presence in the main world financial centres through a network of overseas affiliates and stakes on consortium banks. In addition to London and US, the bank opened a branch in Panama in 1977 to strengthen operations in the North and Latin American area as an “indispensable support for the branch in New York.”^[41] Additionally, in association with the Brazilian banks, and other financial institution of the region, Banco de la Nacion had participated in the creation of BLADEX and was one of its several Latin American shareholders. Apart from Banco de la Nacion, the only other Argentinean offshore banking office in the Caribbean found in the secondary sources is the branch of Banco de Rio de la Plata in Panama (see Figure 3) but there may have been others as well.

Fig. 3

Latin American banks in Panama in 1982. Source: Data from Caballero-Argáez and Avella Gómez (1986).

The Latin American country with the largest banking presence in Panama was Colombia. Unlike other countries of the region, the internationalization and expansion of its commercial banks overseas was largely focused on the Panamanian financial centre (rather than London and New York), which became the main source of foreign funding for Colombian banks.^[42] After the creation of the first banking office in Panama City by the Banco de Colombia in 1970, many other institutions followed and by 1982 ten Colombian banks were conducting business through subsidiaries or branches.^[43] As of 1982, Banco de Colombia and Banco Cafetero ranked at the 13 and 17 position of the largest banks in Panama in terms of total assets, and Banco de Bogota followed next occupying the 26^th position.^[44] Figure 3 exhibits the presence of Latin American banks with general banking license in Panama and their relative size in terms to total assets. Overall, the group of Colombian banks, which included also Banco de Comercio, Banco Comercial Antioqueño, Banco Industrial Colombiano, Banque Anval, and Banco Ganadero, accounted for 6.7 percent of the assets of over sixty institutions with banking license in Panama.^[45] Colombian banks were most populous Latin American group with consolidated assets larger than Brazilian and Argentinean banks together.^[46]

Along with London and New York, the offshore financial centres represented the third leg in the tripod of international banking and global cross-border asset and liability management. In addition to the vast source of liquidity that the London Eurocurrency and American money markets represented, the favourable and flexibly administered tax, exchange control, and banking laws of these safe heaven centres favoured their development into collecting point or booking centre for Euromarket operations. With agencies and branches in these main marketplaces, international banks could engage with regulatory arbitrage practices and conduct their foreign business in more favourable terms. With the encouragement of local governments and a banking sector disproportionate to the needs of the domestic market, these offshore financial centres concentrated a considerable volume of international banking business and global financial transactions. For Latin American banks, operations in the Caribbean included not only Panama as previously discussed, but also the Cayman Islands, where several institutions were also present, and the Bahamas and other offshore banking centres where their existence and business are more difficult to assess.^[47]

For Latin American banks, the presence in these world financial centres was crucial to engage in international banking and the Euromarkets. As a French report on the international interbank market explains, “it seems absolutely possible that an agency in London of a Latin-American bank participates in the London interbank market, while the parent bank would not have the freedom to undertake international operations from their home country, which may be the result of the state of affairs or because of exchange controls in their home country.”^[48] Moreover, international banks looked at nationality and location of their counterparts when engaging in wholesale market transactions, treating with more caution banks located outside major financial centres.^[49] Hence, whereas participating in the international Eurodollar market from home countries may prove challenging, the opening of agencies and branches not only in the US, London and the Caribbean, but also other European financial centres, came along with new funding opportunities. In Germany, Frankfurt was the main marketplace for Latin American banks, where major institutions, such as Banco do Brasil, Banespa, Banco Real, and Banco Mericantil de Sao Paulo from Brazil, Banamex from Mexico, and Banco de la Nacion Argentina from Argentina, opened offices during the 1970s and 1980s.^[50]

5 Latin American Banking in the Euromarkets

As the network of international offices of Latin American banks grew, so did the volume of their foreign operations and their participation in the Euromarkets. Their presence in the world leading financial centres did not only open the door to additional sources of wholesale funding as previously discussed, but also to new business. With dollars raised from London, the US, the Caribbean or other European capital markets, Latin American banks could participate in and coordinate medium- and long-term syndicated Eurolending operations with other international banks, underwrite Eurobonds, and provide short-term trade finance facilities. These were the dominant activities in international banking at the time and the main mechanisms through which banks channelled global liquidity within the Euromarkets, in which Eurocredits played the most preponderant role. International loans were indeed at the heart of the external lending and borrowing boom that culminated in the Latin American debt crisis in 1982.^[51]

Figure 4 displays a tombstone published in the Financial Times of a US$ 150 million syndicated credit granted to the Brazilian Federal Railways System in 1975. The chart illustrates not only the type of operations that Latin American banks could arrange through their foreign offices, but also the collaborative nature and wide network of institutions and financial centres involved in them. Organized and managed by the London branch of Banco do Brasil (the agent bank) in collaboration with other counterparts, the loan involved over 50 banks from different countries and nationalities which jointly provided the funding. Along with Banco do Brasil, two other Brazilian banks – Banespa and Banco Real through their London and New York branches respectively – along with Eulabank and European Brazilian Bank, both of which had Brazilian (and German) ownership, participated in the loan. German banks would usually work along with their Latin American counterparts in this type of operation as this example illustrates. Along with the Bayerische Vereinsbank International and the Bank für Gemeinwirtschaft, which served both as co-managers of the loan, three other German banking institutions, including the Deutsche Südamerikanische Bank, NordFinanz Bank in Zurich, the Norddeutsche Landesbank International in Luxembourg, were also part of the deal. Collaboration between Latin American and German banks went beyond the joint participation in consortium banks and syndicated loans and would also involve the underwriting of Eurobonds as well as the arrangement of other lending facilities to finance international trade and foreign investments.

Fig. 4

Syndicated Euroloan to Brazil with Brazilian and German bank participation. Source: Rede Ferroviaria Federal S. A., in: Financial Times, 20 Aug. 1975, p. 16. Financial Times Historical Archive.

The business models and the extent to which Latin American banks engaged with the different international borrowing and lending facilities was not homogenous. The nature and type of financial activities undertaken by the foreign affiliates of Latin American banks in the Euromarkets have not been fully studied yet, but recent research has provided new insights for some countries and/or institutions. In the case of Mexico, foreign agencies and branches functioned as the arm of parent banks overseas and their operation consisted largely of granting international loans to the Mexican private and public sector through resources raised in the dollar interbank markets.^[52] Unlike them, the external activities and business structures of the agencies and branches of Brazilian banks in international financial centres was more varied and heterogeneous. While Banespa and, most certainly, Banco do Brasil were largely focused on sovereign lending back home in a similar vein to their Mexican counterparts, the extent of reliance on international wholesale funding and the involvement with Eurocredits appears to have been significantly lower for the other Brazilian banks operating abroad. For instance, Banco Real and Banco Safra, two of Brazil’s largest bank overseas, were mostly focused on retail banking and the provision of other financial services.^[53]

The provision of funding to home country clients was nevertheless a main feature of Latin American international banking and the Eurocredits were a crucial instrument. Banco de la Nacion Argentina, for instance, ranked among the top Euromoney’s Lead Managers of Euroloans to Argentina, occupying the second position in 1980 behind Chase Manhattan.^[54] Between 1977 and 1982, as Basualdo et al., (2016) document, Banco de la Nacion became increasingly involved in international lending to national and foreign companies in Argentina along with the public sector, most of which was directly arranged from the branches in the United States, Panama and London.^[55] In the case of Colombian banks, the volume of business of the Panama banking offices became significantly important with respect to the size of parent banks and was an important tool for credit policy and international lending. Eurocredits, as data compiled by Argáez Caballero (1988) shows, constituted indeed the bulk of the assets of the Panamanian affiliates, of which as much as 80.6 percent have been granted to Colombia in the case of Banco Colombo Americano, Occidente and Comercial Antioqueño.^[56] For Banco de Bogota and Banco Cafetero, the corresponding figures were 49.6 and 45.3 percent respectively, with the balance lent to other Latin American countries and in both cases the amount of outstanding loans with the private sector were higher than with the public sector.^[57]

Overall, the internationalization of Latin American banks and their engagement in Euromarket activities resulted in the intermediation of foreign capital with domestic borrowers. Figure 5 illustrates the involvement of the banking sector with international finance in absolute and relative terms for seven Latin American countries in the wake of the crisis. It plots the level of foreign assets and liabilities of commercial banks (i. e., the obligation to and claims with nonresidents) and the ratio of the foreign liabilities to the bank capital as reported by the IMF (International Monetary Fund) in its International Financial Statistics monthly volumes.^[58] The chart shows that, apart from Uruguay, the matching of foreign positions did not prevail, and that external liabilities were generally higher than their asset counterpart – Peru and Paraguay seems to be exceptions. What this means is that financial operations overseas provided with net positive resources that were allocated domestically, making of international banking a mechanism for the transmission of foreign liquidity into the country. Although not represented in the chart for lack of comparable data, a similar situation and pattern is observed in the case of the Mexican commercial banking sector.^[59]

Fig. 5

Foreign assets and liabilities of the domestic banking sector in the early 1980s. Note: Data for end-1982 but for Chile is 1980 (1981 and 1982 are no reported) and the ratio foreign liabilities to capital for Peru is 1980 (data on capital for 1981 and 1982 are not reported). Source: IMF’s International Financial Statistics.

However, the extent of the mismatch and reliance on foreign funding to expand domestic assets varied across countries. Argentina and Brazil, the countries with the two largest financial systems, had similar amounts of foreign liabilities but the leverage levels were significantly different: they represented as much as 9.6 times the amount of foreign assets and 1.7 times the capital base of the Argentina banking sector, and 3.1 and 0.9 respectively in Brazil.

Chile, where commercial banks played an important part in the country’s external indebtedness process, was also highly relying on foreign capital to fund the expansion of national assets.^[60] At an aggregate level, for every dollar in foreign obligations as much as 90 cents were allocated domestically while the remaining 10 cents were use outside Chile. Similar figures are also observed for Colombia – 86 and 14 cents respectively, but the Chilean banking system was significantly more leveraged as foreign liabilities were 2.2 times the capital base and 1.3 in Colombia. In the smaller Latin American countries, whose banking presence in international financial centres was significantly lower or inexistant, involvement with foreign finance seems to have been considerably smaller with foreign liabilities representing only 18 and 20 percent of the capital base of the Peruvian and Paraguayan banking sector respectively.

Along with commercial banks, Latin American consortium banks also acted as Eurocurrency financial vehicles for the region. Created with a particular geographic bias and a well-defined specialist business brief, these banks were deeply engaged in attracting investments and providing international financial services to clients throughout Latin America, becoming major lenders to the continent. As of 1980, for instance, Eulabank and Intermex ranked at the second position in the Euromoney list of top Lead Managers of syndicated loans to Chile and Mexico respectively, while Eurobraz occupied the 11^th position and Libra Bank the 16^th in ranking to Brazil.^[61] The principal activity of the Libra Bank, which operated through its headquarter in London as well as its network of offices in five Latin American countries and New York, consisted in making and granting loans to governments, public and private corporations and bank borrowers in Latin America: as much as 75 percent of its assets in 1982 consisted of Latin American sovereign debt.^[62] Created “to meet the growing demand in Latin America for finance and investment from Europe,” as its first Chairmen put it, the Eulabank had a similar balance sheet structure and asset concentration in the region.^[63]

With a more specific country focus, Eurocurrency lending by Intermex and Eurobraz was mainly concentrated on Mexico and Brazil respectively. Intermex, whose main shareholder was Banco Nacional de Mexico and was chaired by a Mexican banker, was engaged in the underwriting and trading of Mexican securities on the international bond markets, but its principal activity consisted in the arrangement of Eurocredits to the Mexican government and private companies.^[64] Likewise, Eurobraz, whose Chairman has traditionally been the President of Banco do Brasil, had also entered the Eurobond market but the main focus was international credit and its loans portfolio was almost entirely of Latin American character and, more specifically, Brazilian. In fact, the Brazilian exposure was invariably over 80 percent of the whole and a small proportion of the loans were to other countries to secure diversification.^[65] Apart from these London-based institutions, other consortium banks with Latin American banking ownership, such as the Arab Latin American Bank (Arlabank), BLADEX, the Argentine Banking Corporation, or the Banque Arabe et Internationale d’Investissement (BAII), among others, were also suppliers of credits to countries in the region.

6 Financial Fallouts and the Future of International Banking

The financial fallouts in Latin America of the early 1980s, and in particular the outbreak of the international debt crisis in 1982, represented a turning point for the involvement of domestic banks with foreign finance. The Mexican government’s moratorium declaration on its external debt, which brought the country into default and was soon followed by other countries in the region confronting financial crises such as Argentina, Brazil, Chile, Uruguay, among others, put a definitive end to the bank lending boom and petrodollar recycling process that had developed since 1973, launching a new phase of rescheduling and negotiations between debtor countries and their international creditors.^[66] When the crisis hit, not only did the flow of syndicated and direct Eurocredits to governments and the private and public companies from Latin American countries contracted, but also the international activities of the domestic banking sector – which in many countries was under severe problems since before – and business operation of their foreign affiliates was damaged.

One main implication of the crises was the shock waves it sent through the international Eurocurrency markets. As the increased risk perception prompted within a nervous and uncertain market atmosphere, interbank wholesale transactions became increasingly difficult. In the case of Mexico, the foreign agencies and branches in the main international financial centres, which were at the heart of parent banks’ operations in the Euromarkets, went into major financial, and indeed solvency, pressures. With significant amounts of Mexican external obligations in their balance sheets and high exposure to their own debt crisis, the confidence and credit standing of Mexican banks plunged and so did their ability to attract new funds or rollover existing money market credit lines. Even after the Mexican bank nationalization that followed the moratorium declaration, interbank funding lines continued to drain, becoming shorter and more expensive until they were finally stabilized as part of Mexico’s debt rescheduling agreements with international creditor which effectively froze them at the premoratorium levels (and would remain so for the next ten years).^[67]

The problems in the international capital markets also affected other Latin American banks, although the timing, degree and nature of the problems varied across countries and institutions. Figure 6 shows the evolution of the interbank liabilities of the US and London agencies and branches of Argentine and Brazilian banks along with their Mexican counterparts in 1982. For Argentineans, the contraction occurred before the Mexican crisis, was largely concentrated in London, and concerned Banco de la Nacion Argentina which was the only bank with direct operations there. As reported by the Bank of England’s Financial Statistic Division, its balance sheet halved in size since end-March, reflecting mainly the withdrawal of funds prior to the freezing of Argentine balances in London because of the Falklands War that began in April 1982 while interbank business reached extremely low levels (see Figure 6).^[68] As for the branch in the US, data from the FFIEC 002 Call Report shows that, though assets peakead in March 1982 and contracted by 30 percent immediately after the outbreak of the war, interbank liabilities had been in decline since mid-1981 and accumulated a fall of almost 40 percent by June 1982.^[69] As for the other Argentinean banks in the US, the NY branch of Banco de Intercambio Regional was closed in 1981 after the parent bank filed bankruptcy and was intervened in Argentina, while the agencies of Banco de la Provincia de Buenos Aires and Banco Español del Rio de la Plata do not show major changes in the assets and interbank business volumes.^[70]

Fig. 6

Interbank liabilities of Brazilian, Mexican, and Argentinean agencies and branches in the US and London. Source: Alvarez (2019), p. 24.

The evolution of the international money market operations of Brazilian banks overseas was not uniform as not all institution were equally disturbed. At a consolidated level, the interbank funding base of the agencies and branches in the US and London increased up to September 1982 when the debt crisis hit Brazil and declined thereafter (see Figure 6), with Banco do Brasil concentrating the bulk of the drain. Evidence from the Federal Reserve Bank of New York show that Banco do Brasil accounted for as much as US$ 2 billion of the estimated US$ 3.5-4 billion that Brazilian agencies and branches lost in the interbank market during the second half of 1982.^[71] Banespa and, to a lesser extent, Banco Real also suffered from withdrawals of interbank deposits in the US, while a number of other banks were actually able to increase their wholesale liabilities over the period.^[72] However, to the extent that international financial intermediation by the Brazilian had been largely conducted by parent banks’ borrowing of long-term Eurocredits rather than by means of the agencies and branches overseas,^[73] the major effect of the crisis on the banks was through the cutdown of the international credit markets instead of the wholesale interbank channel.

The international debt crisis also impacted the activities of banks operating in the offshore financial centres. The Panamanian banking sector, where the Latin American Caribbean presence was the most predominant, suffered a sharp contraction as foreign deposits and the credit portfolio fell by a quarter and third respectively between 1982 and 1984.^[74] Colombian banks, for which Panama was the main international platform, were seriously impaired in the midst of a severe banking crisis at home: liabilities to correspondent banks dropped by 60 percent over the same period.^[75] Banco de Colombia, Banco Cafetero and Banco de Bogota, as Caballero Argaez shows, were the most vigorously affected. Office memorandums from the Federal Reserve Bank of New York (FRBNY) reports that as of 1984 the Panama affiliates of these banks, which having been largely engaged in lending to the Colombian private sector and their business groups, were under funding pressures as US banks – their main suppliers of funds – continuously withdraw important amounts of interbank credit lines with them.^[76]

The extent to, and mechanisms by, which other Latin American banks operating in the Euromarkets were affected by the financial fallouts in the region have been much less studied and documented. Archival evidence from the FRBNY show that the temporary moratorium announced by Venezuela on principal payments on its external public sector debt in 1983 also included the “interbank placements and money market lines with Venezuela’s three Government-owned banks [Banco de Venezuela, Banco Industrial de Venezuela, and Banco Union] in order to prevent the type of leakage that had occurred in the Brazilian and Mexican case.”^[77] In the case of Chilean banking sector, which had been closely intertwined with the country’s debt crisis, the nature of the foreign liabilities and the way banks operated international financial intermediation remains largely unknown. A study on the by Paul Mentré shows that the net interbank position of Chile with BIS reporting banks was around US$ 1 billion as of 1982-1983, but there is no detail or description on who were the debtor banks and the situation and evolution of these liabilities around the time of the banking and debt crises.^[78] Much less is known about the situation in other small countries whose banking systems had internationalized and came also to confront severe financial meltdowns such as Peru or Uruguay.

Latin American consortium banks also confronted difficulties after the outbreak of the crisis. These banks had been highly reliant on the interbank market for funding and major lenders to the region, and were thereby largely exposed to defaulting countries and vulnerable to drains in wholesale interbank market liquidity. A note from Banking Supervision Division of the Bank of England on the situation of Eurobraz and Intermex, the second and fourth largest Latin American consortium banks, illustrates the nature of the problems these institutions confronted in the aftermath of the crisis.^[79] As of early 1983, in a context of adverse market sentiment against them, the banks were not able to get enough six-month money and they were managing to meet their financial need and get by only through substantial support from their shareholders. In the case of Eurobraz, whose policy had long been not to take funding from their shareholders, the bank had borrowed as much as US$ 500 million from them in the form of standby and advised interbank facilities when the corresponding figure was zero before the troubles in South America. A similar situation was also experienced by Intermex, whose Managing Director Gerard Lagrain “described himself as a swimmer who is just about managing to keep his head above water” and ended up counting on dollar lending form their shareholders to deal with funding strains and meet their interbank market obligations.^[80]

Whatever the specific effects, the financial fallouts of Latin America in the early 1980s brought to an end the international banking expansion process that the region had gone through during the previous decade. In the United States, where the bulk of the foreign network of Latin American banks was concentrated, the number of agencies and branches remained relatively stable during the 1980s as some banks closed offices while others opened new ones. Figure 7 plots the evolution of the total assets of the agencies and branches of Latin American banks in the US between June 1980 and September 1985. It makes clear the overall stagnation of the business volumes after the rapid increase in 1980 and subsequent drop between 1981 and 1982. Likewise, Latin American consortium banks, which had been centrally involved in the recycling of petrodollars and were heavily exposed to the region, entered a period of sluggishness and were eventually closed. Eurobraz, for instance, suffered losses of £247 million in 1987 because of loan portfolio provisions, giving up its banking license the following year to start a liquidation process that was finally accomplished in 1997.^[81] With similar a fate, the Libra Bank and Eulabank were closed in 1990 and Intermex in 1992.

Fig. 7

Evolution of the assets of US agencies and branches of Latin American banks, 1980– 1985. Source: FFIEC 002 Call Reports.

7 Conclusions

This article examined the involvement of Latin American banks in the world leading international financial centres and the Euromarkets during the early years of modern financial globalization. It provides a first comprehensive assessment of bank globalization and its drawbacks in the periphery with the experience of a region from the developing world that was at the centre of international finance developments in the 1970s and the 1980s.

A main implication of the processes and dynamics documented in this study is that globalization of Latin American banks was relatively fast and seems to have been short-lived. During the 1970s, when massive amounts of capital flew into the region while reforms aimed at ending financial repression and opening domestic capital markets in several countries, private and public banks went increasingly global. The number of banks and foreign banking offices network quickly expanded for a widening range of institutions and countries across the continent, and so did the cross-border assets and liabilities operations of the domestic banking industry at an aggregate level. While differences exist from one country to another in terms of the scale and intensity as well as the models of foreign financial intermediation, the outbreak of the international debt crisis of 1982 represented a serious blow to the international activities of the banks from Latin America. It appears that during the lost decade of the 1980s, as the region entered into the most severe financial and economic crisis since the Great Depression, the development of Latin American banking activities overseas stagnated when it did not decline, but this is a topic that goes beyond the scope of this article and deserves further investigation.

While expanding overseas was a salient feature of Latin American banking globalization, another dimension of this process concerned the activities of foreign banks in the region. Overall, despite important differences in the regulatory frameworks and the specific legal provisions, the entry of foreign capital into the banking sector, apart from the Caribbean offshore financial centres, remained relatively constrained in most countries (though progressively softened). The presence of foreign banks and the extent and scope of their operations across different countries during this period have not been fully studied yet, but leading financial institutions from the industrial world were contributing to the internationalization of Latin American banking systems through their subsidiaries and branches or in association with or investments in national banks.

In the case of German banks in Brazil, one of the countries with important foreign banking presence in the region, the big three Deutsche Bank, Dresdner Bank and Commerzbank had direct or indirect representation. Deutsche Bank owned the Deutsche Ueberseeische Bank – transformed to Banco Alemão Transatlântico in 1976,^[82] and all three held stakes in Banco Bradesco de Investimento S.A., based in São Paulo, one of the most important investment banks of the country. In other Latin American countries, German banking presence was relatively less important. Along with its branch in São Paulo, Banco Alemão Transatlântico had also a branch in Argentina (Buenos Aires) and in Paraguay (Asunción). As for Dresdner Bank, it relied on some syndicate and correspondent banks of its subsidiary Deutsch-Südamerikanische Bank, while Commerzbank focused its foreign activities far more on Asia than on Latin America during the 1970s and 1980s.^[83] There was no direct German bank ownership in Mexico, where foreign banks were forbidden by law, nor within the foreign banking community in Colombia or Chile.^[84] There were, however, representative offices, which could initiate business even when not been able to carry it out themselves. As of 1976, for instance, Deutsche Bank had offices in Rio de Janeiro, in Santiago de Chile (also responsible for Peru and Bolivia), in Bogotá (responsible for Ecuador), in Caracas and in Mexico City (responsible for Costa Rica).^[85]

Another important implication concerns the role of domestic bank globalization on the Latin American financial fallouts of the early 1980s. While most of the countries in the region experienced simultaneous balance of payment, banking and external debt payments problems around this period, the relationship of theses crises with the internationalization process of the banking sector have not been fully address yet. Recent research has shown that in the case of Mexico, the international activities of domestic banks were at the base of increasing risk and vulnerabilities that brought the banking system to the brink of collapse in the aftermath of the Mexican government moratorium declaration in 1982.^[86] In Brazil, while internationalization did not expose the commercial banking system to the risks of collapse in the face of the debt crisis, it provided Banco do Brasil – the bank with the largest involvement in the Euromarkets – with an important policy tool for the management of the balance of payment imbalances that may have exacerbated the external indebtedness process of the Federal government and monetary authorities.^[87] Bank globalization and systemic banking crisis were also a prominent in Chile, Colombia and Argentina, but the connection between them as well as with the debt and currency crises have not been fully explored yet.

Finally, the experience of Latin American international banking during this period begs important historical questions about the nature and long-term evolution of bank globalization in the region. To be sure, the financial fallouts of the early 1980s inflicted a serious blow to banking sectors and its operations overseas, but they did not disrupt the process of bank globalization across the continent. As governments engaged in policy reforms that further liberalized domestic financial systems and levied barriers for capital flows during the 1980s and 1990s, the context for cross-border banking operations and the entry of foreign capital into the industry strengthened. Although a study on the development of bank globalization in Latin America in the second half of the 20^th century is still pending, a major shift seems to become apparent after the debt crisis of the 1980s. Unlike in the 1970s when most of the banks leading the process of internationalization where in the hand of national private or public actors, the globalization of Latin America banking since the 1990s onwards appears to have been dominated by a larger presence of foreign ownership in the industry. Further research is needed to study the political economy behind this structural ownership change and the implications in terms of the risk and vulnerabilities for domestic banking systems within the new globalization framework and internationalization scheme.