Globalizing in Hard Times: The Politics of Banking-Sector Opening in the Emerging World

by Leonardo Martinez-Diaz

Overview

In Globalizing in Hard Times, Leonardo Martinez-Diaz examines the sudden and substantial increase in cross-border ownership of commercial banks in countries where bank ownership had long been restricted by local rules. Many parties—the World Bank and the IMF, the world's largest commercial banks, their home governments, and their negotiators—had been pushing for a relaxation of ownership rules since the early 1980s and into the 1990s, when bank profitability levels in advanced industrial societies went flat. In their hunt for higher returns on assets, the major banks looked to expand business overseas, but through the mid-1990s their efforts to impose more liberal ownership regimes in nationalist countries proved largely unsuccessful.

Martinez-Diaz illustrates the ongoing political resistance to liberalized ownership rules in Mexico, Indonesia, Brazil, and South Korea. He then demonstrates the importance of a series of events—the Mexican crisis and the Brazilian banking shock in 1994–1995 and the Asian crisis of 1997–1998 among them—in finally knocking down barriers to foreign ownership of banks. After these upheavals, policymakers who were worried about their political survival—and who were sometimes pressed by the IMF and foreign governments—reshaped the regulatory environment in key emerging markets. Self-proclaimed global banks eagerly grasped the opportunity to expand their operations worldwide, but after the initial shock, domestic politics reasserted themselves, often diluting the new, liberal rules.

Product Details

ISBN-13:	9780801447556
Publisher:	Cornell University Press
Publication date:	11/15/2009
Series:	Cornell Studies in Political Economy
Pages:	256
Product dimensions:	6.12(w) x 9.25(h) x 0.88(d)
Age Range:	18 Years

About the Author

Leonardo Martinez-Diaz is Deputy Assistant Secretary for the Western Hemisphere in the United States Department of the Treasury. He is coeditor of Networks of Influence: Developing Countries in a Networked Global Order and Brazil as an Economic Superpower?: Understanding Brazil's Changing Role in the Global Economy.

What People are Saying About This

Rawi Abdelal

As the current era of global finance reaches a turning point, Leonardo Martinez-Diaz has produced a wonderful book about how and why developing countries open their banking sectors to foreign banks. With prodigious primary research, careful adjudication of evidence, and crisp writing, Martinez-Diaz has produced an original contribution to our understanding of the politics of cross-border banking. Globalizing in Hard Times will be essential reading for scholars, policymakers, and financial market participants for years to come.

Ngaire Woods

Letting foreigners take over a nation's banking system is fraught politics. Simply, it cedes control over a country's financial pipeline. In Globalizing in Hard Times, Leonardo Martinez-Diaz explains how and probes why foreigners were let in—in the cases of Brazil, Indonesia, Mexico and South Korea. Martinez-Diaz invokes images of barbarians, which is especially apt in the wake of a global financial crisis that has exposed some financial institutions as rapacious, overleveraged, and recklessly managed. Globalizing in Hard Times is a must-read for anyone interested in the many facets—positive and negative—of globalization.

Ben Ross Schneider

This is a wonderful book: lucid, convincing, meticulous, and deftly researched. It is timely but will also have lasting value well beyond contemporary financial turbulence. Leonardo Martinez-Diaz starts with the puzzle of wide variation in foreign investment in domestic banking, both across countries and over recent decades, and weaves together the impacts of financial crises, domestic coalitions, and international pressures into a compelling explanation for divergent outcomes. Beyond carefully revealing how globalization refracts through domestic political economies, the book is also a model for theoretically informed, cross-regional comparative analysis and should find its way into central theoretical debates in international political economy, comparative politics, and the politics of banking, as well as ongoing controversies over the optimal roles of states and markets in development.

Editorial Reviews

"This is a wonderful book: lucid, convincing, meticulous, and deftly researched. It is timely but will also have lasting value well beyond contemporary financial turbulence. Leonardo Martinez-Diaz starts with the puzzle of wide variation in foreign investment in domestic banking, both across countries and over recent decades, and weaves together the impacts of financial crises, domestic coalitions, and international pressures into a compelling explanation for divergent outcomes. Beyond carefully revealing how globalization refracts through domestic political economies, the book is also a model for theoretically informed, cross-regional comparative analysis and should find its way into central theoretical debates in international political economy, comparative politics, and the politics of banking, as well as ongoing controversies over the optimal roles of states and markets in development."—Ben Ross Schneider, Massachusetts Institute of Technology

"Letting foreigners take over a nation's banking system is fraught politics. Simply, it cedes control over a country's financial pipeline. In Globalizing in Hard Times, Leonardo Martinez-Diaz explains how and probes why foreigners were let in—in the cases of Brazil, Indonesia, Mexico and South Korea. Martinez-Diaz invokes images of barbarians, which is especially apt in the wake of a global financial crisis that has exposed some financial institutions as rapacious, overleveraged, and recklessly managed. Globalizing in Hard Times is a must-read for anyone interested in the many facets—positive and negative—of globalization."—Ngaire Woods, University of Oxford, author of The Globalizers: The IMF, the World Bank, and Their Borrowers

"As the current era of global finance reaches a turning point, Leonardo Martinez-Diaz has produced a wonderful book about how and why developing countries open their banking sectors to foreign banks. With prodigious primary research, careful adjudication of evidence, and crisp writing, Martinez-Diaz has produced an original contribution to our understanding of the politics of cross-border banking. Globalizing in Hard Times will be essential reading for scholars, policymakers, and financial market participants for years to come."—Rawi Abdelal, Joseph C. Wilson Professor of Business Administration, Harvard Business School

From the Publisher