The assigned reading is based on a review of Latin America
The assigned reading is based on a review of Latin America’s Banking system and how it has been able to grow over the period of time due to policies which have radically changed the competitive landscape for the banks in the region.
The writer has argued that the due to decrease in interest rates, increased maturities of long term liabilities as well as prudent fiscal and monetary policies, the banking system of Latin America has greatly benefited and is contributing to the overall growth of the Region.
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The article cites the example of Chile as a model for change in the region through adopting more robust and flexible economic policies. The article also discusses some of the implications for the local banks in the region also as more and more international banks are making entry into the market. This phenomenon is not only making competition tougher but also forcing local banks to be the target of the forced takeovers.
Three Questions
What the article however failed to account for is the fact the Brazil is the most progressing country in the region however; its banking sector is still under the Government control and is largely protected[1] and have shown considerable growth therefore the assumptions of the writer that the Latin America’s banking sector has shown growth because of less government intervention may not be acceptable? (South American Business Information , 2001).
Further, the strategic choices offered to the local banks can only be achieved in long term therefore insulate themselves in short run, such local banks may need government protection to further allow them to grow in size therefore the strategic objectives offered by the writer may not be wholly practical? The article has further discussed the possibility of cross-border transfer of best practices due to similarities in culture however it failed to ignore the political and regulatory landscape of the region?
Bibliography
1. South American Business Information . (2001). Brazil: Banking sector has good performance. Retrieved Feb 18, 2009, from www.allbusiness.com: http://www.allbusiness.com/banking-finance/banking-finance-overview/9709591-1.html
[1] Brazil’s banking sector has witnessed consolidation which was largely local in nature as local banks merged with each other.
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