How Nafta Has Affected the Financial Service Industries in the United States, Canada, and Mexico

1751 Words Aug 5th, 2005 8 Pages
The North American Free Trade Agreement (NAFTA) was enacted in November of 1993 with aims to facilitate the free flow of goods, services and labor between the United States, Canada and Mexico. The ratification of NAFTA created the world 's largest free market with roughly 390 million consumers and an estimated total output of $8.6 trillion. Clearly, this trade alliance has had a major influence on the financial service industries of the participating nations and will continue to do so in the future. However, the financial service provisions of NAFTA will have sufficiently greater implications for Mexico than either the United States or Canada. This is in part because Mexico is embarking upon a greater shift towards openness in its …show more content…
and Mexico. The Bank of Montreal is also buying U.S. assets. This financial services company recently acquired CFBdirect and Morgan Stanley 's online-only accounts and placed them under its HarrisDirect brand.
Canada 's major financial institutions are also getting involved in the Mexican market. The Bank of Montreal owns 16 percent of Mexico 's largest bank, Grupo Financiero Bancomer, and Scotia bank owns 8 percent of Grupo Inverlat as well as maintains effective managing control. Canadian banks also have a slight advantage over U.S. banks because of their long history of interstate branching and their experience with universal banking. These have just been recently allowed in the U.S. by the passing of the Gramm-Leach-Bliley Act. The reduction of Mexican barriers will provide new markets and opportunities for the Canadian financial sector that they previously did not have access to. Canadian firms will be able to participate in sectors that were previously restricted. This essentially means access to Mexican banks, stock markets and investments that have limitless potential. The financial sector in Mexico compared to the United States and Canada was, and is, very small and not very diversified. This makes this market extremely attractive to the foreign banks given its huge growth potential. An additional important financial service for the United States and Canada is the investment fund market, which is
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