Leonardo Martinez‐Diaz
Oxford Univeristy
August 7, 2006
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worked, and how the politics of selling indigenous banks to foreigners unfolded. In addition,
by neglecting de facto opening, these studies miss the “demand” side of the equation—they fail
to recognize that the implementation of openness also depends on the willingness of foreign
capital to enter once the regulatory locks are undone.
The argument
To overcome some of the limitations of the previous research on banking‐sector opening in the
developing world, I propose a line of inquiry with several features. In addition to its de jure
dimension, I will consider de facto opening in this study, bringing into the analysis this
neglected but crucial aspect of opening. Also, this analysis will be guided by a framework,
developed Chapter 2, which explicitly incorporates domestic, international, power‐political, and
ideational drivers of opening, ensuring that none of the key potential factors are excluded.
Finally, this inquiry will avoid the limitations of the single‐case study by examining the
experiences of three countries.
The limits of external pressure
The overarching argument of this research project has two parts. The first relates to the drivers
of banking‐sector opening. I argue that external political and economic pressure, by itself,
drove neither de jure nor de facto banking‐sector opening. As I will show in Chapter 3 and in the
case studies, the record of the IMF and World Bank in promoting banking‐sector opening before
1997 was modest in general and poor in Mexico, Brazil, and Indonesia, in particular. Similarly,
trade‐in‐services initiatives—through which most of the political pressure from big global banks
and their governments was channeled—failed to achieve significant opening and acted only as
weak lock‐in mechanisms. As a result, major developing countries engaged sufficient space to
engage in the “managed opening” of their banking sectors in the 1980s and early 1990s—
Convention