Central Bank Autonomy in Mexico / Volume II: Mexican Central Bank Autonomy: Historical Background
Author: Eduardo Turrent
Date: 2015-11-13T06:00:00+00:00
Publisher: Banco de México

Central Bank Autonomy in Mexico

A Historical Overview

Volume I

The Central Banking System in the World

Agustín Carstens

Governor

Roberto del Cueto Legaspi
Manuel Ramos Francia
Manuel Sánchez González
José Julián Sidaoui Dib
Deputy Governors

BANCO DE MÉXICO

EDUARDO TURRENT
Project supervision

AÍDA GARCÍA DIMAS
Historical research and project coordination

ANTONIETA CRUZ
Editorial coordination

ANTONIETA CRUZ
GERMÁN GÓMEZ
Iconographic research

NOSTRA EDICIONES
Editing, design, and prepress

SANDRA FERRER ALARCÓN
Graphic and editorial design

LUCERO VÁZQUEZ TÉLLEZ
ROSALINDA RESÉNDIZ PADRÓN
Graphic design

GREGORY DECHANT
Translation

MARÍA ESPERANZA ZOREDA LEE
Translation oversight

LIDIA CASTRO RAMÍREZ
Text transcription

LUIS EKIRO
GERARDO PEÑA TORRES
Banco de México images 2012

We would like to thank the following institutions for their support:
Sistema de la Reserva Federal
Banco Central de Chile
Centro de Estudios Monetarios
Latinoamericanos, CEMLA

Banco de México:
Oficina de Acervo Numismático
Subgerencia de Coordinación de Archivos
Subgerencia de Numismática y Comercialización

The reproduction of the images of banknotes used to illustrate the present work has been authorized by the Secretaría de Hacienda y Crédito Público (official authorization UBA/DGABM/1339/2005, dated November 2005).

First edition, 2012

All rights reserved

BANCO DE MÉXICO
Avenida Cinco de Mayo 2
Colonia Centro
Delegación Cuauhtémoc
06059, México, D.F.

IEBN: 484-132-000005-28

Printed in China

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Mexican Central Bank Autonomy: Historical Background

Historical Background and the Fundamental Law of Banco de México

Following the enactment of the Constitution, with its Article 28, the establishment of the single bank of issue became one of the most desired aims of Venustiano Carranza’s government. The first draft bill submitted by the president proposed a “wholly official” bank, “managed exclusively by the State.” The proposal was rejected by the ruling committees of the Congress to which it was turned over. According to the ruling, the bill violated the spirit of the discussion held during the Constituent Congress, for by doing without “private capital in the organization of the bank” and “the presence of shareholders on the institution’s Board of Directors” it also renounced a “moral guarantee of great importance… since through such shareholders the opinions and needs of the collectivities could make themselves felt.” According to the ruling committees, the participation of the private sector was the form of organization best suited to the “democratic spirit [,] with the orientation the Revolution has sought to give our institutions.”[1]

In September 1920, just five months after Adolfo de la Huerta was sworn in as interim president, congressman Antonio Manero submitted another draft bill to the legislature for the establishment of a single bank of issue.[2] The “Statement of Purpose” confirmed the doctrinal consensus that had developed in the matter. Many of the arguments were drawn from the experience of central banks in Europe and the United States and from considerations of comparative legislation.[3] At the same time, the legislator must have been aware of the committee ruling on the Carranza bill. Perhaps in order to avoid a similar outcome, he adopted the modality of a “mixed” institution in his draft bill. The principal central banks of Europe and the United States had been constituted with private sector participation in subscription of the capital and membership on the Board of Directors.

President Venustiano Carranza, who promoted the first draft bills for the establishment of the Single Bank of Issue, as called for in Article 28 of Mexico’s Constitution.

It did not take long for a counterproposal to Manero’s bill to emerge from the ranks of President De la Huerta’s supporters. The Secretary of Finance, Salvador Alvarado, and his Under Secretary Manuel Padrés submitted to the legislature the proposal that the Credit Institutions Law and Single Bank Law be integrated into a single statute.[4] Strictly speaking there was no great difference between the proposal of Alvarado et al., and the one submitted by Manero three months earlier.

In any case, Manero’s draft bill, like that of Alvarado et al., would be filed away, with no action being taken subsequently to make it law.[5] So by the middle of 1921 several bills had been submitted to Congress, with no real progress having been made on the definition of the matter of the single bank. Seeking to move the matter forward, congressman Manero suggested in the legislature that “all of the bills submitted so far be integrated into a single proposal,” in the aim of achieving some sort of consensus on the fundamental aspects of the very complicated question. The motion was passed on 14 March 1921 and the general proposal was submitted to Congress on July 7th of the same year.[6] As for the fundamental aspects of the institution, the proposal called for:

Autonomy of the bank; effective government control; management derived directly from shareholders; positive note issue guarantees; voluntary circulation of banknotes; concentration in the bank of all internal revenue affairs related to public services; reciprocity of services between the government and the bank; elimination of functions proper to banks of other kinds; equity in the distribution of earnings among shareholders and the State; strict limitation of the political and managerial action of the Executive Bank on the bank; and complete freedom of action regarding the economic elements that are to be involved in the establishment and development of the institution.[7]

Antonio Manero was an important figure in the process prior to the founding of Banco de México. As a member of Congress, he drafted several bills for the establishment of a central bank, becoming one of the most acknowledged and authoritative experts on the matter in Mexico.

The founding of the single bank transcended the internal framework of national life and became tangled with the turbulent external affairs of Mexico during this critical period of incipient reconstruction. By the time the Revolution ended in 1921, Mexico’s international creditors had joined together in the so-called International Bankers Committee. The purpose of the Committee was to negotiate the recommencement of payments on the country’s foreign debt with the Mexican government. Although in general the members of the Committee had a single interest in common, i.e. the recommencement of payments, there were different focuses and ambitions. One of the members, Sir William Wiseman, for example, was

...interested in the founding of the single bank of issue in Mexico, exactly as called for in Article 28 of the Constitution of 1917, but by using for it the already existing structure of a private bank in which he had strong interests: the National Bank of Mexico.[8]

According to the bankers on the committee, and perhaps also to the “Sonorans in power,” the recommencement of service on the debt would be the key step towards official recognition of Obregón’s government in Washington. De la Huerta himself came to believe that the agreement on the foreign debt reached in 1922 was a great diplomatic triumph, from which the foundation of the single bank of issue would necessarily follow.

After the signing of the agreement, De la Huerta went into action on the legislative front and obtained authorization from Congress for the executive branch to establish a single bank. This motion, which led to the emergence of a new proposal in which the bank was defined as a “mixed” institution, at least had the consequence of eliminating legislative interference in the matter, which had already caused so many problems.[9] The proposal called for the federal government to subscribe at least 51% of the capital and a Board of directors appointed entirely by private shareholders, who would nevertheless represent a minority on the board.[10] Also, the federal government would appoint the institution’s statutory officers and under no circumstance would loans be made to the government in excess of 20% of the paid capital.

In the months leading up to his resignation as Secretary of Finance, Adolfo de la Huerta made some final efforts to obtain a loan for the establishment of a central bank, but these came to naught. His failure sharpened the differences and increased the distance that had existed for some time between him and Obregón, leading to the former’s resignation and eventual armed uprising.[11]

From the time of the Constituent Congress, the dilemma facing those who wished to establish a central bank was embodied in two challenges: the composition of its paid capital and the doctrinal and legal definition of the institution’s characteristics. Without downplaying the “doctrinal” challenge, it could be said that the question of funds for the bank was the pièce de résistance of banking reform in Mexico. The point of inflection was reached in the years 1924 and 1925, when Secretary of Finance Alberto J. Pani, “inverting the terms of the traditional Mexican internal revenue equation,” transformed a deficit into a surplus, managing to assemble the necessary funds for the foundation of the long-sought-after central institution.

At the end of 1924, Pani appointed a commission to draft the constitution and bylaws of the future single bank.

The extraordinary powers granted by Congress to the Executive in the area of public finances ensured that work on the creation of the Single Bank of Issue would not be hindered by sterile legislative debates such as those that had impeded realization of the project eight years before. The commission chaired by Pani was made up of three additional members: Manuel Gómez Morin, Fernando de la Fuente, and Elías S. A. de Lima.[12]

Manuel Gómez Morin’s training as an expert in central banking began perhaps in 1921. Gómez Morin took advantage of his stay in New York City, at the head of the Agencia Financiera de México, to take a degree at Columbia University, studying the subject, and in particular the functioning of the Federal Reserve System. From New York he had urged De la Huerta on several occasions that a single bank of issue needed to be established “as a demonstration of the financial strength” and organizational capacity of Mexico to the bankers and oilmen of the United States.[13]

The third and last member of the commission was Fernando de la Fuente, a Sonoran who had been very close to Calles and Obregón since the days of the Revolution. De la Fuente was a lawyer, well-versed in the technical aspects of law and Mexican legislation in general. While the drafting commission was doing its work, De la Fuente was head of the Department of Credit of the Secretariat of Finance. “Curiously enough, the new economic battle they were engaged in led De la Fuente and Gómez Morin refer to Elías de Lima as ‘mi general.’”14]

The activities of the drafting commission continued without interruption and by July of 1925 the documents were almost ready. The Fundamental Law of Banco de México was enacted on 15 August 1925.[15] Broadly speaking, the law was divided into four sections: 1) theory and doctrine of the central banking system; 2) previous draft bills of this same law; 3) circumstantial reasons for the law, resulting from the economic, banking, and historical situation of the country at the time; and 4) structural and institutional background incorporated in the legacy of the Comisión Monetaria, S.A. Two cases clearly illustrate this process: the regulations governing the issue of banknotes and the institution’s function as a bank of banks. The section on note issue was a balanced combination of doctrinal principles and a careful consideration of the country’s experience of issuing banknotes in the recent past. Taking into account the background to the case, the law established some very cautious requirements for issuing banknotes. Banknotes could only be issued under three conditions: with backing in gold coinage or bullion; in exchange for foreign money orders convertible on sight to gold; or through rediscounts performed by the bank with its associated institutions.

On both sides of President Álvaro Obregón, two of the most important members of his administration: Secretary of the Interior Plutarco Elías Calles and Secretary of Finance Alberto J. Pani. Both Calles and Pani would soon become key figures in the founding of Banco de México.

The rules for the functioning of the institution as a bank of banks were a test of the pragmatism of the designers of the law:

The conditions then prevailing were far from favoring the implementation and development of a bank designed to serve as the axis and hub of a genuinely national banking system. Strictly speaking, the country had no banks, since the establishments that displayed the name hardly deserved it in terms of the size of their operations, while the branches of foreign banks that had opened a few years before, although they were handling a large part of free Mexican capital, had not —as time would demonstrate— really put down roots.”[16]

Prudence counseled that the commercial banks not be forced to associate themselves with Banco de México. Moreover, the transactions the bank could perform with its associates were formulated with a certain sobriety. The main requirement was that rediscounts could only be performed for commercial ends with liquid assets in terms of more than 90 days. Nevertheless, the institution was allowed to perform other operations with its associates, such as opening lines of credit in the current account and discounting cashier’s bonds with special requirements.

Finally, at the end of August 1925, it was possible to announce that all was ready for the inauguration of Banco de México. The ceremony began at ten o’clock in the morning, when President Plutarco Elías Calles, accompanied by his cabinet, arrived at the offices of Banco de México located in the Banco de Londres building, at the corner of 16 de Septiembre and Bolívar. Also present were the “higher representatives of the banking system, industry, commerce, and workers’ organizations,” as well as members of the foreign diplomatic corps. A few hours after the inauguration, Calles delivered his first annual address as president of Mexico on the state of the country and his administration. In describing its achievements in the area of public finances, Calles declared that “the recent achievement of the proposed Bank of Issue has become a national necessity that may not be postponed and a pressing demand of the people,” and he concluded:

I would like to close this part of my message by giving myself the satisfaction of informing you —and through you, the entire nation— that today, the first day of September of nineteen hundred and twenty-five, at ten o’clock in the morning, Banco de México, S.A. was inaugurated. By this act yet another of the conditions for the recommencement of service on the Foreign Debt, and therefore the reestablishment of Mexico’s credit abroad, has been satisfied, fulfilling one of the most important points of the revolutionary program that our people wrote, with its generous blood, in the Constitution of 1917, and advancing a long way on the path that leads to national economic autonomy.[17]

Young lawyer Manuel Gómez Morin became the most trusted advisor of presidents Obregón and Calles. “Morincito,” as the Sonoran generals called him, played an important role in the founding of Banco de México and was appointed Chairman of its Board of Directors, a position he occupied until 1929.

An important historical point deserves to made concerning the legal framework within which the institution was established: the Fundamental Law of Banco de México was signed by President Plutarco Elías Calles, and the “Secretary of State and of the Office of Finance and Public Credit, Alberto J. Pani.” What is more, the official text began in the following way: “Plutarco Elías Calles, Constitutional President of the United Mexican States, lets it be known to their inhabitants. . .” It went on to explain that “in the exercise of the extraordinary powers” with which he had been invested “in the area of Finance by the Honorable Congress of the Union,” the president had seen fit to issue the law in question. This was not a mere legislative formality. In politics, as in management, authority is delegated and responsibility is shared. President Calles shared the responsibility for the law’s provisions not only by virtue of the fact that he had signed the legislation but for another important reason: because the corresponding draft bill had been dispatched to Congress by the Executive under his responsibility. And among the provisions contained in that bill was the clear intention to create an “institution endowed with the necessary individuality and independence.”[18]

Secretary of the Interior Adalberto Tejada also signed the first organic law that governed Banco de México in its history. Although they received no mention when the law was first published in the Diario Oficial on 25 August 1925, there is no doubt that the drafters of the law, along with Calles and Pani, shared paternity. Such was the situation, specifically, of the lawyer Manuel Gómez Morin, the immigrant banker Elías S.A. de Lima, and the Sonoran lawyer Fernando de la Fuente. These men can be justly considered forerunners of the establishment of central bank autonomy.

Secretary of Finance Alberto J. Pani (center) along with other people, among them renowned banker Rafael Nieto (to Pani’s left).

There are two explicit mentions of the subject of autonomy in the “Statement of Purpose” of the Fundamental Law of Banco de México. The first states that “whatever the amount of the capital contributed by the Nation” to the bank’s equity, it is fundamental that the institution be organized “with the necessary individuality and independence,” going on to explain that the State control of the single bank of issue demanded by the Constitution is perfectly compatible “with the idea of independence.” The second mention concerns the makeup and functioning of the Board of Directors. Given the organization of this body in terms of the appointment of its members and functioning, it could not be subject either “to the orders, or even the instructions, of the Government shareholder,” which could only “make its action be felt through indirect methods, one of which was its vote, like that of any other shareholder, in the general shareholders’ meetings.” The clear intention of these provisions was to avoid

...in a bank controlled by the Government, the grave danger of political interests coming to predominate at a given moment over the public interest, that is, of the Government representing the interests of men belonging to the party which constitutes it and ignoring the national interest.”[19]

The provisions of the Fundament Law reveal the legislators’ intention of creating a group of institutional counterweights based on the idea of checks and balances. The measure of creating a minority series of shareholders exemplifies this intention. In addition to contributing to the capital, these shareholders could help to watch over “the majority, serving as a brake to it, keeping abreast of what it is doing, performing the function of public opinion with respect to it, and serving as a prudent corrective.” Another mechanism conceived by the legislators in their quest for balance was the right to challenge appointments. Series “B” shareholders would have the right to challenge the appointment of up to four of the five directors designated by the majority series “A” shareholders, who would have in turn the right to challenge up to three of the four chosen by the series “B” shareholders. This right existed in addition to the other requirements incorporated in the law for members of the Board of Directors in general. Those appointed to the board were to be persons with “known understanding and experience of banking and commercial matters.” Moreover, individuals who had been elected to office by popular vote, civil servants, and anyone with a possible conflict of interest with Banco de México were prohibited from serving on the Board of Directors.”[20]

For the purposes of the autonomy of the newly-established bank of issue, much more important were the guidelines on the limits or ceilings of the growth of key variables. This principle inspired several of the basic provisions of the Fundamental Law, but of special importance was the limit on loans granted to the federal government, which could not exceed 10% of the paid capital (Article 22, Section I). The law also prohibited Banco de México from granting loans to states or municipalities. Other limits had to do with the issue of banknotes, with transactions with related parties that constituted a common risk and cases of conflict of interest. As for the first of these ceilings, the institution was not allowed to issue banknotes in an amount exceeding the double of its gold reserves.[21]

Forerunners of Central Bank Autonomy

Manuel Gómez Morin, a central figure in the creation of Banco de México, did not take part in the drafting of the Organic Law of 1936, whereby the autonomy of the institution was reinforced. Soon after being named Secretary of Finance in December of 1935, Eduardo Suárez called on lawyer and monetary economist Miguel Palacios Macedo to draft a new law for Banco de México. The idea was to consolidate its special role as a bank of issue and to give it a fully modern character. Secretary Suárez knew Palacios Macedo well and was aware of his convictions on the issues of central banking and currency. He was doubtless sure that Palacios Macedo would draft a law for the functioning of the bank that was “free of any inflationary trend.”[22]

It is possible to find at least five explicit references to the autonomy of Banco de México in the “Statement of Purpose” of the 1936 law. According to the framer of the law, the autonomy of the central bank needed to be consolidated and strengthened in a fundamental way. Seen from this perspective, autonomy was a safeguard or shield rather than just an instrument. A shield against what? The 1936 law and its “Statement of Purpose” leave no room for doubt: from the possibility of “an inflationist policy” being put into execution. In other words, the law sought to eliminate the possibility of “[note] issues in unlimited quantities, since that would be equivalent to implicitly authorizing an inflationist policy, which is precisely what needs to be avoided.”[23] The framer of the law was also alert to the conflicts that tend to arise when a central bank acts as a monetary regulator and bank of banks, preferring that its backup function be exercised only by exception, “unless it identifies itself completely with its regulatory function.”[24]

Eduardo Suárez (second from the left), Secretary of Finance from 1935 to 1946, during whose term the Organic Law of Banco de México of 1941 was passed, replacing the previous law of 1936.

In order to avoid the possibility of an inflationary policy, two safeguards were incorporated into the 1936 law: a careful framework for regulating operations and establishing limits or padlocks on the expansion of fundamental monetary aggregates. Deserving of particular mention in this regard were the limits placed on the issue of banknotes, one explicit and one implicit. According to the first, the sum of the balance of banknotes and sight deposits of Banco de México could not exceed the amount of 50 pesos per inhabitant of the country. The implicit limit was derived from the operations that could lead to note issues, which fell into three categories: payments made by the bank through its liabilities, the exchange of other circulating currencies, and investments authorized by the law itself. As for international reserves, the balance was never to be under 100 million pesos, or less than 25% of the sum of banknotes in circulation and the sight deposits in Mexican currency held by Banco de México.[25]

Palacios Macedo was right: the question of autonomy was most delicate and most significant in relation to “matters in which the State has a direct interest.” The most controversial aspect of this issue was and has continued to be the amount of loans that a central bank can extend to its government. The “Statement of Purpose” of the 1936 law specified that the “autonomy of the Bank” needed to be “clarified and broadened.” This slightly cryptic turn of phrase doubtless referred to the modalities and limits within which the central bank could extend credit to the government.

How then could Banco de México provide financing to the federal government? There were two aspects to this question: first, the accepted procedures for granting such financing and second, the limit or limits to which it should be subject. The law provided for two procedures. The first was through the acquisition of bonds issued by the government with strict specifications on terms and guarantees. The second was the possibility of generating overdrafts in the federal government’s current account, the so-called Treasury Account. As for the limit, the sum of the balance for these items was never to exceed “ten percent of the average annual revenues that the Treasury of the Federation had received in cash over the three previous years.”[26]

The autonomy that the Organic Law of 1936 sought to confer on Banco de México was short-lived. Conflicts arose when it became evident that the administration of Lázaro Cárdenas had other ideas about the credit procedures to which it might resort in order to finance its reform programs. Meanwhile, while Palacios Macedo was maneuvering in the autumn of 1937 from his position on the Board of Directors of the central bank to get the government to abandon its inflationary policies and to respect the principles that had inspired the Organic Law of 1936, Manuel Gómez Morin was invited to Ecuador by the government of that country. The Mexican expert was called on to prepare a plan for reorganizing the Ecuadoran central bank so that it would be equipped to handle the specialized tasks reserved to an institution of its kind.[27]

Lawyer and monetary economist Miguel Palacios Macedo, who drafted the Organic Law of Banco de México of 1936. This law sought to strengthen the autonomy of the bank of issue so that it could function “free of any inflationist trend.”

There was some historical background to this invitation. Most importantly, Gómez Morin had already worked as a consultant to the government of Ecuador. In 1933 he had been invited to serve as the country’s representative at the World Economic Conference in London. A few years later, runaway inflation was causing a public uproar in Ecuador and, at the beginning of 1937, President Federico Páez sought advice on hiring a prestigious foreign expert in currency, banking, and credit to prepare a plan for reorganizing these matters in Ecuador. The fame of the Mexican lawyer had gone beyond the borders of his own country and he was recommended to the Ecuador government.[28]

Following a few months of what must have been intense activity, the consultant submitted to the consideration of the government that had hired him a package of material known as the “Gómez Morin legislation.” The core of the package was an organic law for the central bank, a currency law, and a general banking law. The Central Bank Law prepared by Gómez Morin for the government of Ecuador called for an autonomous institution with limits on note issue and precisely defined relations with the federal government.

Logically, perhaps inexorably, the causes of monetary stability and the autonomy of the central bank found their way into the ideology and platform of the National Action Party (Partido Acción Nacional, or pan). It was almost natural that this would occur, given the role that Manuel Gómez Morin played in the founding of the party.[29] Thus, in April 1939, when the party published its Basic Political Action Program, in what it considered an “essential act,” the questions of currency and credit were taken up in the chapter on “general economic organization”:

The creation of fictitious money, like the unconsidered and disproportionate investment of public funds, are criminal acts against the economy of the Nation and it is irresponsible, therefore, to generate new public debt unnecessarily, to squander the resources of the Nation on short-term or frankly useless enterprises, and to attempt in any way, directly or surreptitiously, to increase fiscal resources through undue increments in circulating currency or the reduction or disproportion of monetary reserves and the devaluation or instability of the currency.30]

Years later, a unique opportunity presented itself in the midst of the crisis that had developed as a result of the devaluation of 1948 and the fact that the party was represented in the Congress for the first time. Thus, the numerous legislative proposals tabled by the pan on 27 October 1948 included a plan to reform the Organic Law of Banco de México. There was at least one other proposal in the package that was directly linked to the reform of the central bank law: a reform of the securities market, whose aim was to prevent Banco de México from offering to repurchase certain government bonds at par value, which was one of the causes of the monetary expansion that had led to inflation.

Both the contents of the bill to reform the Organic Law of Banco de México of 26 April 1941 and the “Statement of Purpose” were clearly the work of Gómez Morin. The inflationary process that had led to the exchange crisis of 1948 originated in the way Banco de México had been administered, with expansionist operations that were contrary to the specialized functions proper to any central bank worthy of the name. Specifically, the “Statement of Purpose” opened with a historical account of how the “deterioration of this economic instrument [i.e. the central bank]” had occurred, owing to the “inept and deliberately destabilizing amendments made to the Organic Law of Banco de México and the legislation governing Credit Institutions.”[31]

The Organic Law of Banco de México, for various reasons, among which considerations of proper management or a responsible concern for the good of Mexico and its future did not find a place, has been changed, diverting the Bank from its principal mission as a regulator of currency and subordinating it in this and other areas of its functioning to opportunistic motives, to capricious and circumstantial programs or to interests that are far from having the collective interest of Mexico at heart… The monetary stock of Mexico has therefore grown out of all proportion with any increase in production, obviously causing a major devaluation of the currency and opening the door, with the most dire of precedents, to an evil which gangrenes and destroys the entire economy.”[32]

Once this reform had been prepared by means of the traditional legal “technique” used by lawyers to draft laws, the restoration of Banco de México’s autonomy would be achieved through a more or less complicated network of provisions with reciprocal references. The first and most crucial was to establish a limit or ceiling on the credit that Banco de México could extend to the federal government. The complementary provisions would fulfill the fundamental purpose of closing all possible loopholes whereby financing through primary credit would find its way to the Treasury. The focus was nothing new. It had already been used in the Fundamental Law of Banco de México enacted in 1925 and with even greater emphasis in the Organic Law of 1936.

It did not go unnoticed to these reformers that the Organic Law of Banco de México of 1941 already set a limit or ceiling to monetary expansion. This was the stipulation that the balance of international reserves could never be less than one-fourth (25%) of the total of “the banknotes placed in circulation and the sight deposits in Mexican currency held by the Bank, except for the Mexican peso account of the International Monetary Fund.”[33] What the bill tabled by the National Action Party did was to strengthen this provision slightly by stipulating that the “foreign currency or exchange” which in addition to gold and silver made up the international reserves could not constitute more than the fifth part of the balance of this fund.[34] What did go unnoticed to the reformer, however, was that this limit or ceiling could be evaded or eluded through the expedient of devaluation, since an identical balance of reserves at a depreciated exchange rate would increase in proportion to the amount of the exchange rate depreciation.

It was in this building of the Congress that several laws were tabled: the Organic Law of Banco de México of 1936, which strengthened the independence of the central bank; the law of 1941 that replaced it; and the rejected draft bill of 1948 submitted by the National Action Party, which sought to restore autonomy to the central bank.

Given the intention to close all possible channels to an uncontrolled expansion of the money stock by Banco de México, a third section of the bill was complementary to the one just described. Aimed at eliminating undue activities in the securities market, it sought to prevent Banco de México, as we have seen, from offering to repurchase government debt bonds at par value, as had been the case since 1940 with Nacional Financiera and its well-known “share certificates.”

It was certainly not by chance that this emphasis on limits to certain key aggregates on the central bank’s balance sheet had also been proposed by Gómez Morin in the draft bill he prepared in 1937 for the Central Bank of Ecuador. One ceiling, clearly conceived with a preventive purpose, was recommended for the circulation of banknotes “in relation to the need for them by the country’s inhabitants.” Also, since the central bank’s sight deposits virtually constitute potential banknotes, a corresponding limit was set to the sum of this aggregate (Article 38 of the draft bill). The mechanism was completed by a padlock on “silver coinage,” in order to avoid the practice, which had been common in Ecuador when minting was the responsibility of the Finance Ministry, of increasing production of silver coins so that the Treasury could generate revenue from seigniorage. The proportion of notes and sight deposits to metallic money was set at 2-to-1. Gómez Morin adduced the following justification for the measure: “This is a limit that could normally be described as theoretical, but it would have an effect as a moderating and preventive factor against undue expansions of the means of payment.”[35]

Nevertheless, the genuinely preventive element in reining in monetary expansion, not “theoretical” but practical, was incorporated in Article 39 of the draft bill. It is worth pointing out beforehand that this provision was even stricter than the one formulated a decade later in the Banco de México law, drawing with much greater precision on the principle by which the classic gold standard functioned:

[I]n the structure proposed in Art. 39 the traditional English policy has been accepted… of assigning to an autonomous department of the Central Bank the elementary function of delivering banknotes only against receipt of the corresponding legal reserve to be submitted precisely and indispensably by the other department of the Bank, that is, the operations department… Thus, the Reserves Department shall not be legally empowered in any way to make loans: it shall only be by a simple deposit of gold or banknotes that an official of the Operations Department may obtain banknotes against gold, or vice versa, gold against banknotes.[36]

In the Diario de Debates, the official record of the Mexican Congress, it was entered that both the draft bill to amend the Organic Law of Banco de México and the complementary proposal to “prohibit undue activities in the securities market” were “turned over to commissions” on 22 October 1948. The idea of the National Action Party legislators was that they be ruled on during the ordinary period of sessions that year. What actually happened was that the proposals were never reviewed. The majority party’s tactic in the Congress was to defeat the opposition by attrition, letting such matters draw out until the members who had tabled the legislation simply gave up.

Therefore, on the list of matters to be dealt with during the extraordinary period of sessions… discussion of the bill to amend the Organic Law of Banco de México was not included… This being the case, of even less interest was [consideration] of the harm done to the Mexican people by the undue intervention of official institutions in the securities market… That is why there was no need to vote on, or even discuss, the draft of the Law to Prohibit Undue Activities in the Securities Market.[37]

The cover proudly displayed the image of the congressmen who had waged the determined legislative battle. Drawn in ink, the faces of the main protagonists of the legislative episode described in these pages were especially prominent, accompanied by a phrase printed to one side: “Three independent congressmen have shown what a real Congress can be.” Inside there was a word-for-word account of the address by the leader of the National Action Party to the seventh National Assembly. Surprisingly, the first sections of the address did not refer to political matters or to the very important electoral question but to the subject of “The Mexican Economy.” According to the speaker, the exchange rate crisis, with its consequences, the widespread speculation, the “mythology of agrarismo,” and the serious social problems in the areas of highways, transportation, labor, and social security had only made the need for “a genuine national program of Government” all the more pressing. This program would include:

The reform of Banco de México, in order to return the central institution of our economy to its proper mission… the prohibition of the worst maneuvers which have been taking place in our market, in order to destroy it, promote state control, and aggravate the effects of inflation… Banco de México continues to be unequipped to assume its responsibilities to the Nation. The market continues to be suffocated not only by monetary uncertainty but by the weight of those deceitful repurchase agreements and the unspeakable practice of issuing securities directly designed to produce the creation of new money.[38]

But the political and ideological times were unfavorable to those visionary reformers. They were well aware of the adverse political circumstances but perhaps not so much of the ideological climate, which therefore calls for a word of explanation. At the end of the Second World War, Keynesianism had acquired great influence in the study of economics and the model of an autonomous central bank was buried in the avalanche of Keynesian ideas. In Great Britain, the Labour Party under Clement Atlee won the election and drove Winston Churchill from Downing Street.

In an expression of the new era of political economy, the Atlee government hastened to amend the legal status of the Bank of England. The nationalization of the institution was based on two measures: first, the decision that all the Bank’s shares would be owned by the British government; and second, the incorporation of an article in the bank’s organic law whereby the Treasury would be empowered to give the Bank of England whatever instructions it deemed advisable for its functioning. The only attenuating condition was that these instructions would be issued “upon consultation with the Governor” of the institution.[39]

British prime minister Clement Attlee carried out a reform in 1948 that stripped the Bank of England of its autonomy. Paradoxically, it was another Labor government, around half a century later, which restored the central bank’s independence.

The Organic Law of 1941

During the six-year administration of President Lázaro Cárdenas the strategy of resorting to deficit financing was consolidated, in the aim of carrying out the government’s social and economic program. The intellectual influence of Eduardo Suárez, the Secretary of Finance, was decisive in the adoption of this strategy and also in the later defense of it in public debate. The main theoretical influence was The General Theory of Employment, Interest, and Money by English economist John Maynard Keynes, though Suárez also often invoked the ideas of John Law on financing investment through an expansionary monetary policy.[40] This consolidation of theoretical ideas in the area of economic policy which developed in the final years of the Cárdenas administration led shortly thereafter to the decision to create a new legal framework for banking and monetary policy.

According to Raúl Martínez Ostos, the idea of drafting a new Organic Law of Banco de México emerged alongside the desire to modify the general banking law. This is not difficult to understand, considering that the two laws, complementing each other, would constitute the legal framework for credit institutions in Mexico. It also meant, therefore, “that the review of the legal status of Banco de México was to precede a complementary review of the framework within which other Credit Institutions operated.”[41]

The main purpose of drafting a new organic law for the central bank was to gather into a single, integrated instrument the modifications and amendments —scattered over a series of isolated and unconnected reforms— which the Organic Law of 1936 had undergone since its promulgation. Generally speaking, the provisions incorporated into the Organic Law of 1941 had already been postulated by an amending law of 28 December 1938. Sometimes, however, in the reformulation of a legal framework, it is not enough simply to amend a statute; an entirely new set of rules is required.

No limit was set in the Organic Law of 1941 on credit granted to the government. Nevertheless, the 1941 law stipulated that the balance of international reserves could under no circumstances be less than 25% “of the amount of banknotes issued and sight deposits in Mexican currency in the Bank’s charge.”[42] This restriction might appear at first glance as sufficient to impede the application of an expansionary monetary policy by the central bank. But this was not strictly the case. The padlock offered by the coefficient of at least 25% of international reserves to Banco de México note issues and sight deposits could be dodged or eluded through the option of devaluation. The technical reason for this is that, if the exchange parity were to depreciate, then the balance of international reserves, measured in Mexican currency, would increase, whereas the sum of banknotes and sight deposits would remain constant.

A second purpose of the new Organic Law was to adapt the legislation to the new theoretical conceptions that had prevailed in the debates of 1937. The outcome of these controversies was clear: Banco de México was to be able, when necessary, to obtain “an expansion in the general volume of means of payment” through its operations with associated institutions. This notion, which had already been incorporated in the reform of 1938, involved another channel of operations: that of the central bank’s credit relations with the federal government. This point was clarified at least in passing in a statement by Antonio Carrillo Flores in 1975: “Banco de México is, as we have said, a central bank insofar as its fundamental concern is to supervise, within its possibilities, the regular functioning of the Mexican monetary system. Its role is not, however, and this was determined once and for all in the controversies of 1938, to indicate the overarching strategy of development, which has been and is the inescapable responsibility of the higher bodies of the Government”.[43]

The Organic Law of 1941 also introduced what might be called a new management philosophy into the administration of Banco de México. This conception, which had inspired the general banking law of the same year, was also incorporated into the complementary legislation governing the central bank. The “Statement of Purpose” of the latter law stated: “Excessive regulation of the different ways in which Banco de México can operate in the area of its own competence, which was characteristic of the law to be amended, has been eliminated.”[44]

The provisions governing three important aspects of rediscount operations illustrate this point: the rates applicable to rediscounts, the rules for performing these operations, and the maximum terms. The 1936 law contained strict stipulations of the rates that central bank could apply in rediscount operations with its associated institutions. Interest rates were determined by the type of operation, its term, and the guarantees provided by the rediscounted paper. Thus, for example, the rate was to go down if an uncollateralized instrument bore more signatures or if the debt instrument was collateralized. These rules were made even more precise in 1937, when regulations complementary to the Organic Law were issued. But it was only in December 1938, as a result of the legal reforms issued in that year, that the trend was reversed. Nevertheless, the interest rates approved in 1937 remained in effect until 1940. It was only in the Organic Law of 1941 that these regulations concerning rediscounting rates and terms were removed, leaving decisions in the area to the sole judgment of the management of the bank (Article 26).[45]

Eduardo Suárez, who was in charge of public finances during the presidencies of Lázaro Cárdenas (1934-1940) and Manuel Ávila Camacho (1940-1946), proclaimed himself an intellectual disciple of John Maynard Keynes, embracing the English economist’s ideas of stimulating growth through fiscal and monetary expansion.

It did not take long for criticism of the 1941 legislation to arise, once the details of the new law were known. The most combative opposition came from the principal framers of the laws that the new legislation replaced: Manuel Gómez Morin and Miguel Palacios Macedo. As we have mentioned, the Organic Law of Banco de México of 1941 abrogated the preceding statute of 1936 and the new banking law the 1932 statute on the same subject. Gómez Morin’s challenges were directed exclusively at the banking law, while the criticisms of Palacios Macedo took aim at the entire legislative package, which included both laws. The “public power” having offered the Bankers’ Association “the opportunity to intervene in the matter,” the meetings held on the premises of Banco de México, at which the banking legislation was submitted to the consideration of the banking sector, provided an occasion to present these criticisms publicly.

Palacios Macedo’s memorandum is evocative to some extent of the debates of 1937-1938, in which two opposing ideological positions were confronted one another. On the one hand, there was the orthodox view that emphasized the unchanging validity of certain economic axioms: it is not “the principles that must adapt to concrete realities but the concrete realities to the principles.”[46] On the other hand, in the new legislation about to be passed there was the flexible, empirical spirit that exemplified the triumphant ideological position, the “healthy pragmatism that has guided Mexican policy in recent years,” as Carrillo Flores put it in 1974.[47]

This is not the place to reproduce in its entirety Palacios Macedo’s argumentation, which fills seventy-one pages and displays him as both a brilliant polemicist and a learned scholar not only of the economists we might call pre-Keynesian —Cassel, Wicksell, Bendixen, Hawtrey, Von Mises, Sayers and others— but above all of the Keynes of A Treatise on Money, the book out of which The General Theory of Employment, Interest, and Money of 1936 would evolve.[48] The following is an attempt to synthesize Palacios Macedo’s arguments against the banking legislation of 1941. The heart of the matter is the supposedly inflationary character of the new statutes, especially the new Organic Law of Banco de México.

Contrary to what is claimed in the “Statement of Purpose,” the proposed statute “no longer contains those precautions fundamental to the system of a Central Bank, nor does it define in clear terms the field of the money market.” The true aim of the reform is this and only this: to destroy the framework of precautions established in the present Law as an impediment to the concrete activities of the Bank being deviated from their principal object, which is to provide the country with a healthy currency and a solid banking system. This is the real meaning of the announcement in the “Statement of Purpose” that the new Organic Law has eliminated the “excessive regulation of the different ways in which Banco de México can operate in the area of its own competence,” which where the characteristics of the Law being amended.

Therefore, concluded Palacios Macedo, “the path set out for the activity of Banco de México” could only lead “to a national disaster, because it is incapable of engendering anything but the most unbridled inflation.”[49] In his view, one of the “unacknowledged” motivations of the new statutes was to legalize “vicious,” illegal practices which both Banco de México and private bankers had been engaging in for some time. Regarding the reasons alleged by the authors of the legislation, Palacios Macedo insisted that they were completely “imaginary, not to say false,” and that the “only novelty worth mentioning” that the new statutes contained was that they set up “as a norm and presented as a paradigm of technical perfection” what the 1932 and 1936 legislation held to be “corrupt practices and inacceptable abuses.” The author of the memorandum doubted the potential effectiveness attributed to the draft version of the Organic Law, since it was not the first time the Banco de México law had been amended “in the aim of facilitating abidance by its provisions… and the result of previous amendments was zero, to the point of making further amendments necessary in order to legalize new violations.”[50]

According to the memorandum, the consequences of the inflationary thrust of the new legislation would be the gradual and continual freezing of bank assets and, as a result, a state of definitive illiquidity in the deposit institutions. It was argued that the new statutes dangerously extended the terms of the instruments and credits with which both the central bank and the commercial banks could operate. The maximum terms stipulated by the 1932 and 1936 laws “for loans and commercial paper discounted or acquired by Banco de México and the Commercial Banks” against sight deposits or the issue of banknotes was 270 days, whereas the new legislation extended “said maximum term” to a year.

Not only that, the new statutes relaxed the rules on the renewal of loans and credit instruments. The banking law of 1932, taking into account the history of credit in Mexico, where bankers had the “ingrained habit” of granting whatever renewal or extension the client requested, strictly prohibited procedures of this kind, while the new legislation readily accepted “the repeated renewal of the operations performed by the Deposit Banks,” including even those with terms of a full year. This provision was incorporated in the Banco de México law. The Organic Law of 1936 authorized “the renewal or extension” of loans “a single time, in exceptional cases,” and only with the approval of at least seven members of the Board of Directors.[51] Palacios Macedo allowed himself the following conclusion:

If the aim of the Draft Bills we are commenting on is, as the “Statement of Purpose” assures us, to make of Banco de México an “effective regulator” of the “general conditions of circulation and credit,” or of the “volume of credit expansion,” they must be amended in such a way that only sound, liquid businesses remain in the bank portfolios, starting with that of the Issuing Institution, since only in this way will it be capable of fulfilling its essential tasks, taking into consideration the circumstances in which its activities are performed. If this is not done, one is obliged to state that the projected legislative reform has other ends, and greater importance than that indicated in the aforementioned “Statement of Purpose”; that the State abdicates the power it had hitherto claimed and constantly exercised in this area, ceasing in fact, in favor of the administrators and shareholders of the Deposit Banks, to effectively regulate and supervise their operations, to the detriment of the authority of the Central Bank, of the stability of the banking system, and of the value of the currency.[52]

The “Statement of Purpose” of the new laws insisted that one of the objectives of the new statutes was to “distinguish the banking system in the strict sense, the deposit banks, from the investment companies or institutions” and to clearly differentiate the ambit of the money market from that of the capital market, an asseveration that Palacios Macedo energetically refuted. The new banking law, rather than separating the respective ambits of the money and capital markets, confounded them, allowing the institutions proper to each one of these areas to perform operations that belonged to the other. In this sense, the commercial banks could “capture savings through the issue of short-term bonds and extend [long-term] credit,” while all of the investment institutions covered by the law would be empowered to perform operations proper to deposit banks.[53]

After stating that the new laws did not clearly define the limits of the money market, Palacios Macedo analyzed the capital market. It is here that the memorandum becomes most critical:

Neither have the authors of those statutes understood the extremely peculiar position of the Central Bank in relation to the financial or capital market. Mistakenly applying the theories of Keynes —the writer who has claimed most victims among amateur economists— these persons seek to attribute to Banco de México the control of the long-term investment market through the purchase and sale of securities on the open market. The persons referred to do not know or have wished to forget many things about the object and technique of these transactions. Caricaturing the ideas of Keynes, they transform this business into an independent instrument of the direct daily intervention of Banco de México into the Stock Market when, in the opinion of the present writer, the normal action of the Central Bank on the financial or capital market should always fulfill a precise purpose, and be exercised only insofar as it is required to achieve this purpose. This purpose consists of maintaining the stability of the general level of prices, that is, the purchasing power of money, through the balance of savings and value of capitalization.[54]

From there Palacios Macedo directed his reflections toward the old controversy in England between “bankers and monetary heretics,” which Keynes had immortalized in A Treatise on Money. The goal: to attract both factions to the “good cause of the stabilization of the currency.”

The “army of heretics and cranks, whose number and enthusiasm are extraordinary,” was made of those “monetary reformers” who suppose that the banks “can provide without limits all the credit needed by industry and commerce without any real cost to anyone.” On the other side, the conservative bankers argued that the traditional coefficients between credit and the banks’ cash reserves should be respected at all costs and that it was only possible to grant loans up to those limits:

And by way of recapitulating, Keynes sums up the terms of his controversy with “heretics” and “bankers” as follows: The Banks fix the amount they will lend in accordance with their reserves (a practice which is naturally imposed on them —it must be acknowledged— by the monetary systems in effect). On the other hand, the heretics would prefer to fix it in accordance with the sum of the productive factors available to those to whom work can be given. But neither speak of fixing it in relation to the balance of capitalization and savings, which is nevertheless the only way of maintaining price stability.[55]

Keynes was convinced that “heretics and bankers” were irreconcilable enemies, but he had reached the conclusion that by refuting both a “reconciliation on a ground of common understanding” could be achieved. This notion “was doubtless justified in England, where the ‘heretics’ and the ‘bankers’ happen to be authentic, but it is exceedingly comical in Mexico, now that reform measures are about to be passed with which ‘heretics’ and ‘bankers’ are equally in agreement. It is the only path toward ‘reconciliation’ that Keynes had not foreseen: the ‘bankers’ become ‘heretics’ and the ‘heretics’ turn ‘bankers.’”

And further on he added:

If we are to adhere to the views of the author referred to —unimpeachable and decisive, for the reasons cited— and make use of his felicitous terminology, we must conclude that in the Draft Bills under discussion there is an attempt to combine things that Keynes considers opposite and all but incompatible, namely: the inflationary errors of the “heretic” and the routine myopia of the “banker”; which confirms our view that such projects are the work of fantasizing “heretics” who wish to pass for “bankers,” formulated with the active agreement and applause of certain “heretical bankers.”[56]

Palacios Macedo grounded his argumentation in the apparent lack of decisiveness involved in framing the norms to be incorporated into the statutes he was criticizing. According to the “Statement of Purpose” of the new banking law, the regulations had been constructed on the basis of three principles which the most “intransigent banker” (in Keynesian terms) would approve without hesitation. The first was the willingness to “formulate the plan of the Credit Institutions in such a way as to distinguish” deposit banks from investment banks. The second consisted of fixing a maximum limit of 2% “of liabilities to be available for investment in bonds and securities,” with the condition that these comply with certain characteristics and be “high-liquidity assets.” Third, “a minimum of 30% of the total of the balance,” consisting of cash reserves, was to make up the “credit of the central bank, that is, circulating currencies and sight deposits” in the central bank itself, along with the investments generated by the “sale of merchandise effectively transacted at terms of no more than ninety days.”

John Maynard Keynes, author of The General Theory of Employment, Interest, and Money, the celebrated treatise which became an important reference for Mexican and Latin American economists in general. Among Mexican Secretaries of Finance, no one identified more closely or more publicly with Keynesian economics than Eduardo Suárez.

Nevertheless, the draft bill could not bring itself to “roundly affirm any one of the three principles enunciated,” but rather sought to “mitigate them” in order to make them easier to comply with. According to Palacios Macedo, it was precisely this mitigation that offered the legislators the opportunity to incorporate into the law all of the inflationary operations endorsed by the “heretics.”

It is obvious that behind each of the “amendments” cited there is the idea described by Keynes as a common and distinctive to all monetary “heresies,” namely the assumption that the Banks may in one way or another provide all the real resources reasonably required by industry and commerce… It is for this reason, and not out of a desire to mitigate them in some way to make their application more flexible, that the authors have refrained from roundly affirming any of the three principles enunciated… It is easy to see, moreover, that in the drafting of the new General Law of Credit Institutions there has been an attempt not simply to mitigate them… but to twist and infringe them, subordinating them to the real purpose of the “amendment,” which we identified above…[57]

Endnotes

Mexican Central Bank Autonomy: Historical Background

[1] Antonio Manero, La reforma bancaria en la Revolución constitucionalista (Mexico City, 1958), pp. 107-111.

[2] “Proyecto de Ley Orgánica del Banco Único de Emisión presentado por el diputado Antonio Manero” (20 September 1920), in Trejo (ed.), El banco único de emisión, pp. 69-78.

[3] Manero’s draft bill in ibid., p. 76.

[4] Salvador Alvarado, Manuel Padrés, Pedro Solís Cámara, Fernando González Rosa, and Alfonso Caso, Proyecto sobre Organización Bancaria (Mexico City: Secretaría de Gobernación, Dirección de Talleres Gráficos, 1920); see also Trejo (ed.), El banco único de emisión, vol. I, first book, second part, pp. 86-107.

[5] Manero, El Banco de México, p. 223.

[6] “Autorización para englobar el Estudio de las Diversas Iniciativas que sobre Instituciones de Crédito se han presentado y para producir un solo Dictamen” (14 March 1921), in Trejo (ed.), El banco único de emisión, vol. II, third book, first part, chapter 3, p. 13.

[7] Manero, La reforma bancaria, pp. 121 and 122.

[8] Enrique Krauze, Caudillos culturales en la Revolución Mexicana (Mexico City: siglo veintiuno editores, 1976), p. 127.

[9] Manero, La reforma bancaria, pp. 124 and 125.

[10] Ibid., p. 124.

[11] Jan Bazant, Historia de la deuda exterior de México (1823-1946) (Mexico City: El Colegio de México, 1968), p. 193.

[12] Enrique Krauze et al., Historia de la Revolución Mexicana: La reconstrucción económica (Mexico City: Fondo de Cultura Económica, 1977), pp. 37 and 38.

[13] Krauze, Caudillos culturales, pp. 110, 112-113, 128, and 219-221.

[14] Ibid., p. 221.

[15] “Ley que crea el Banco de México y Exposición de Motivos” (25 August 1925), in Legislación sobre el Banco de México (Mexico City: Secretaría de Hacienda y Crédito Público, 1958), p. 85, and Virgil M. Bett, Central Banking in Mexico (Ann Arbor: University of Michigan Press, 1957), p. 34.

[16] Manero, El Banco de México, pp. 190 and 195-196.

[17] Plutarco Elías Calles, “Informe de Gobierno,” Diario de los Debates del Congreso de la Unión (1 September 1925), p. 17.

[18] “Ley que crea el Banco de México y Exposición de Motivos,” pp. 59, 85, and 111.

[19] Ibid., pp. 59 and 63.

[20] Ibid., pp. 60-62.

[21] Ibid., pp. 67, 74, and 75.

[22] “Ley Orgánica del Banco de México y Exposición de motivos” (28 August 1936), paragraph 50, in Legislación sobre el Banco de México, p. 234.

[23] Ibid., paragraphs 39, 44, and 60, pp. 229, 231, and 239.

[24] Ibid., p. 239.

[25] Ibid., paragraphs 44, 45, and 75, pp. 231-232 and 245.

[26] Ibid., “Exposición de motivos,” paragraph 84, and Article 38, sections XVI and XII (h), pp. 272 and 273.

[27] Manuel Gómez Morin to Jorge Vivas of Guayaquil, Ecuador (29 December 1937), in the Manuel Gómez Morin Archive.

[28] María Teresa Gómez Mont, Manuel Gómez Morin, 1915-1939 (Mexico City: Fondo de Cultura Económica, 2008), p. 717.

[29] Soledad Loaeza, El Partido Acción Nacional: la larga marcha, 1939-1994 (Mexico City: Fondo de Cultura Económica, 1999), pp. 198 and 202.

[30] Partido Acción Nacional, Programa Mínimo de Acción Política (1949), p. 21.

[31] Luis Calderón Vega (ed.), Iniciativas de ley presentadas por el Partido Acción Nacional, vol. I (Mexico City: Editorial Jus, 1972), pp. 75 and 76.

[32] Ibid., pp. 57 and 58.

[33] “Decreto que reforma la Ley Orgánica del Banco de México” (30 December 1947), in Legislación sobre el Banco de México, p. 395.

[34] Vega (ed.), Iniciativas de ley, p. 78.

[35] “Análisis de las prescripciones fundamentales del anteproyecto de Ley del Banco Central,” memorandum in the Manuel Gómez Morin Archive, p. 27.

[36] Ibid., pp. 29 and 30.

[37] “Los PRI diputados se defienden contra las incómodas iniciativas del pan,” La Nación (17 January 1949), p. 10.

[38] “Informe del Jefe de AN a la VII Asamblea Nacional Ordinaria,” La Nación (28 February 1949), p. 11.

[39] Guy M. Watson, El Banco de Inglaterra (Mexico City: Centro de Estudios Monetarios Latinoamericanos, 1960), pp. 31-33.

[40] Francisco Suárez Dávila, “Dos visiones de la política económica de México: un debate en la historia (1946 a 1970),” in María Eugenia Romero Sotelo (ed.), Historia del pensamiento económico en México. Problemas y tendencias (1821-2000) (Mexico City: Trillas, 2005), p. 229.

[41] “Exposición de motivos” of the “Ley Orgánica del Banco de México” (28 August 1936), paragraph 34, in Legislación sobre el Banco de México, p. 226.

[42] “Ley Orgánica del Banco de México” (25 April 1941), Article 18, in Legislación sobre el Banco de México, p. 342.

[43] Antonio Carrillo Flores, “Acontecimientos sobresalientes en la gestación y evolución del Banco de México,” in Ernesto Fernández Hurtado (ed.), Cincuenta años de Banca Central (Mexico City: Fondo de Cultura Económica, 1976), p. 52.

[44] “Exposición de motivos” of the “Ley Orgánica de 1941,” in Legislación sobre el Banco de México, p. 332.

[45] “Ley Orgánica del Banco de México” (28 August 1936), Article 38, Sections VIII, IX, and X, in Legislación sobre el Banco de México, pp. 268-270.

[46] Ibid., paragraph 11, p. 238.

[47] Carrillo Flores, “Acontecimientos sobresalientes,” p. 40.

[48] John M. Keynes, A Treatise on Money (London: Macmillan, 1930).

[49] Antonio Armendáriz and Raúl Valdés Villarreal [Miguel Palacios Macedo], “Observaciones de la Barra Mexicana a la reforma bancaria: Por qué es inconveniente y peligrosa la nueva legislación,” Jus 33-34, paragraph 6, p. 227.

[50] Ibid., paragraphs 3 and 5, pp. 224 and 226-227.

[51] Ibid., paragraphs 13-15, pp. 239-243.

[52] Ibid., paragraph 15, pp. 242 and 243.

[53] Ibid., paragraphs 35-39, pp. 428-441.

[54] Ibid., paragraph 18, pp. 247 and 248.

[55] Ibid., paragraph 31, p. 423.

[56] Ibid., paragraphs 29 and 32,pp. 416 and 423.

[57] Ibid., paragraph 34, pp. 427 and 428.

Central Bank Autonomy in Mexico

A Historical Overview

The publication consists of 10 volumes:

1. The Central Banking System in the World
With Preface and Foreword

2. Mexican Central Bank Autonomy: Historical Background

3. Concurrent Visions

4. Echoes from Abroad

5. Institutional Autonomy

6. A Difficult Takeoff

7. Unprecedented Stability
With Sources Consulted

Table of Contents

- Mexican Central Bank Autonomy: Historical Background

- Historical Background and the Fundamental Law of Banco de México

- Forerunners of Central Bank Autonomy
- The Organic Law of 1941
- Endnotes