All exclusive: the politics of offshore finance in Mexico

Abstract

At first sight, Mexico appears to be a textbook example of a state affected by offshore finance. Offshore financial services allow corporations and the wealthy to plan taxes, avoid regulations or to launder money. The literature holds that large, developing, open economies, with geographical proximity to offshore centers and problems of crime and corruption are particularly affected by offshoring. By this logic, we should expect Mexico to show a significant demand for offshore financial services. Yet, new empirical evidence derived from interviews and banking statistics suggests otherwise. Mexican firms and individuals make only limited use of offshore finance. The article explains why. Building on a Weberian notion of the state, the article shows that the historically exclusive nature of Mexico's state concentrates political and economic power such that the onshore economy offers similar rents for economic elites as offshoring. Moreover, in instances where economic actors use offshore services it is driven by banking, not taxation. These findings have two theoretical implications. First, they confirm that institutions matter, though differently than hitherto thought. Second, we must look beyond taxation to include banking into our analyses.

Why are tourist resorts attractive for transnational crime? The case of the Mayan Riviera

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Financial globalization as positive integration: monetary technocrats and the Eurodollar market in the 1970s

“…Somewhat paradoxically, little is known about the evolution of the Eurodollar market since the 1980sthe topic all but disappeared from the IPE literature precisely when the Eurodollar market had become the backbone of the international monetary and financial system. Recent research, however, has shown that it is impossible to make sense of financial globalization and US monetary power without a thorough understanding of the offshore dollar system (Binder, 2019;Hardie & Maxfield, 2016;Hardie and Thompson, forthcoming;Murau, 2018;Schwartz, 2019).…”

Crash for cash: Offshore financial destinations and IMF programs

“…First, weak institutions make it easier for political and business groups to infiltrate the policymaking process and evade capital controls (Kang, 2002;Méon and Sekkat, 2005;Aleksynska and Havrylchyk, 2013). Furthermore, institutional weaknesses form a comfortable breeding ground for all sorts of criminal activities (Bruno, 2019), effectively functioning as a trigger for investors to deposit their profits in offshore accounts for safekeeping (Hessami, 2014;Binder, 2019). An empirical implication is that elite capital flight should be more pronounced in countries with relatively closed capital accounts.…”