The Strength Of The Financial Industry

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Question 1 - The Spaniards had the capability and know-how to succeed in Latin America due to the strength of the financial industry in Spain. The strength of the financial industry in Spain is a result of a regulated growth strategy that not only ensured the stability of the Spanish financial market, but in so doing developed banks that had the wherewithal and capital to expand internationally. The strengthening of the financial industry in Spain was a methodical process that occurred over several decades.
(PEST) Multiple macro-economic forces in Spain facilitated a sturdy financial industry capable of expanding in Latin America. Political influences in Spain guided the financial industry to liberalize. The government, “In Spain
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Similar to the domestic banks, the international bank involvement varied from subsidiaries to joint-ventures. The third category of competition in Latin American involved other Spanish banks seeking to gain market share. Through acquisition and competition, the two largest Spanish banks to emerge in Latin America were BBVA and BSCH.

Question 2 – Chile provides the most attractive market for a foreign bank. Amongst Latin American nations, Chile was the first country to privatize and liberalize the financial industry. Given Chile’s early commitment to liberal financial policies, several macroeconomic indicators exist revealing the potential in its market. Annual GDP growth remains high at 7% and revenues from exports is transitioning away from commodities to manufactured goods signifying the presence of working middle class. Furthermore, Chile’s workforce is the most educated and trained compared to Argentina and Mexico. Argentina, while maintaining the highest per capital income amongst all Latin American countries, is not as attractive of a market. Nearly a third of Argentinians deal in Cash only and the Argentinian government lacks the power to privatize a substantial number of municipally owned banks. Similar growth-stifling factors exist in Mexico. At the time of the case, the Mexican government is not issuing any new bank licenses. Santander, BBV, and BCH each used different entry modes in Chile, Argentina, and Mexico in order for each bank
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