A specialist in financial aspects of development, Antonin Basch was formerly an economist on the staff of the World Bank, where, among other projects, he directed studies of capital markets in several Latin American countries. His present monograph is one of a series under the auspices of the Inter-American Development Bank which thus far also includes works on Colombia and Peru. Basch has produced a useful companion volume to previous studies of the Mexican financial system by such writers as Aubey, Bennett, Brothers, Goldsmith, and Solis.

The first two chapters briefly survey Mexican financial developments in relation to recent economic growth and describe the main types of financial institutions in the country, both public and private. One is struck by the extent to which Mexico’s rapid growth has been accompanied (and doubtless facilitated) by an adaptive evolution of financial mechanisms. The use of checking accounts has risen notably, although their volume has grown more rapidly than the number of depositors, while savings accounts have become even more widely used, if much smaller in total volume. As a means of absorbing private savings for medium- and long-term investment purposes, fixed-income securities have played a prominent role. Some types of private financial institutions (e.g., fiduciary institutions, savings and loan banks, etc.) have shown relatively little growth in recent times, but others such as private mortgage banks, financieras, and commercial banks have experienced considerable growth. The important contributions of state-owned banks and other public financing agencies are also remarked.

The third chapter details the key position held by the Banco de México in the capital market, as well as some significant changes which have taken place in its activities over the years. During the latter part of the 1950s, for example, the Banco, convinced that it was important to keep strict controls on monetary expansion, began deliberately to reduce its relative participation in financing the government debt and required private financial institutions to invest growing amounts of their deposits in public securities. Thanks to the latter measure the public-sector investment program could expand with less inflationary impact. The very limited use made of central bank rediscounting has been another element in the counterinflationary policy, although this has also denied to the Banco de México one means of influencing interest rates.

The fourth and last chapter of the study examines the workings of the three securities exchanges, especially the most important, in Mexico City. The book concludes with a brief but sophisticated discussion of the problems which still await resolution, and although the author does not offer a detailed set of recommendations, the general direction of desirable change is clear from his remarks at several points in the book. Among other things, Baseh feels that a greater portion of corporate financing could usefully be channeled through the security exchanges rather than being handled over the counter, as at present, and that a greater use of variable-return securities might, be preferable to the present heavy reliance on fixed-return securities. As he recognizes, however, neither change seems to be in the immediate offing.

For what it sets out to present, the book is an effective and informative study, and it can be highly recommended to all who are interested in Mexican development. One may wish, however, that the investigation had gone into greater depth regarding the more informal mechanisms of the capital market, although admittedly this would be difficult. The zuibatsu-like financial cliques or investor groups and the large conglomerate corporate structures will probably be so important in mobilizing and allocating capital that one notices their absence in a book of this sort. An economic study which ignores them seems rather like a survey of icebergs which stops at the water line.