Nacional Financiera (NAFIN)

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Nacional Financiera (NAFIN)

Nacional Financiera (NAFIN) is a national development bank in Mexico. Beginning in 1925 with the establishment of the Bank of Mexico, the nation's central bank, the Mexican government organized more than a dozen public credit institutions to aid in the reconstruction of the financial system and to support the development of specific sectors of the economy. NAFIN was formed in 1934 to carry out a variety of functions, chief among them to promote the development of a stock exchange and a market for public bonds. In 1940 NAFIN was reorganized and given responsibility for industrial promotion.

Publicsector support through NAFIN for industrial development was an important element in Mexico's revolutionary program to construct a modern, capitalistic economy while reducing the nation's reliance on foreigners. During the 1940s large public-sector infrastructure projects accounted for most of NAFIN's loans and investments. Although the development bank nominally was autonomous, its board and officers worked closely with the Treasury Ministry and the Bank of Mexico. Nacional Financiera's resources, which were derived largely from foreign borrowing and the sale of its own certificates, were channeled into irrigation, transportation, and communication. The bank was also instrumental in the "Mexicanization" of electrical power generation.

During the late 1940s NAFIN, while not abandoning its commitment to the nation's infrastructure, became deeply involved in the financing of heavy industry, particularly manufacturing. The development bank not only extended credits, but also often adopted the role of entrepreneur by taking majority or minority positions in large-scale industrial enterprises in the steel, cement, paper, and transportation equipment industries. Bank management's rationale for its aggressive involvement in such projects was that they could not or would not be undertaken by private investors because of the financing requirements and technical complexities. By the early 1960s NAFIN was the majority stockholder in thirteen business firms and was creditor, investor, or guarantor for 533 others.

Sensitive to criticism from the private sector, NAFIN has worked closely with private investor groups to organize and finance businesses. It has also established a unit to assist small and medium-size business and has opened branches in provincial capitals. In 1985, with Mexico experiencing its worst economic crisis in modern history, NAFIN was charged with a new task, export promotion, and its budget was doubled in order to facilitate the government's industrial reconversion and export policies.

Despite NAFIN's status as the preeminent industrial development bank in Mexico, and perhaps in all of Latin America, it has not escaped criticism. Nacional Financiera's access to resources, financial power, and influence came to overshadow that of the private banking system. Some segments of the Mexican private sector are wary of NAFIN's aggressive incursions into certain industrial activities, arguing that the bank has preempted opportunities for private investors, and that as a result the Mexican government has overstepped its bounds. It has also been accused, through its activities, of favoring a small group of Mexican investors and large projects to the detriment of small business. On balance, however, NAFIN's contribution to the building of modern economy in Mexico has been positive and innovative, particularly through its financing of the economic and social infrastructure.

In the 1990s, the Mexican government liberalized the financial sector and allowed foreign banks to invest in Mexico, but NAFIN continued to be an important lender. Since this time, NAFIN has focused more aggressively on small and medium size enterprises (SMEs). By 2006, NAFIN had made loans to approximately 125,348 SMEs; this type of company received nearly 80 percent of NAFIN's credit. In the twenty-first century NAFIN has also expanded outside its borders by providing loans to Hispanic-owned companies in the United States.

See alsoBanking: Overview; Economic Development.


Charles W. Anderson, "Bankers as Revolutionaries," in The Political Economy of Mexico, edited by William P. Glade, Jr., and Charles W. Anderson (1963).

Calvin Blair, "Nacional Financiera: Entrepreneurship in a Mixed Economy," in Public Policy and Private Enterprise in Mexico, edited by Raymond Vernon (1964).

Douglas Bennett and Kenneth Sharpe, "The State as Banker and Entrepreneur: The Last Resort Character of the Mexican State's Economic Intervention, 1917–1970," in Brazil and Mexico: Patterns in Late Development, edited by Sylvia Ann Hewlett and Richard S. Weinert (1982).

Jeff Brannon, "The Nationalization of Mexico's Private Banking System," in Mexico, a Country in Crisis, edited by Jerry R. Ladman (1986).

James M. Cypher, State and Capital in Mexico (1990).

Additional Bibliography

Garrido, Celso. Desarrollo económico y procesos de financiamiento en México: Transformaciones contemporáneas y dilemas actuales. Mexico City: Universidad Autónoma Metropolitana; Azcapotzalco: Siglo Veintiuno Editores, 2005.

Stallings, Barbara, and Rogério Studart. Finance for Development: Latin America in Comparative Perspective. Washington, DC: Brookings Institution Press; Santiago: UN Economic Commission for Latin America and the Caribbean (ECLAC), 2006.

                                  Jeffrey T. Brannon