Banco de México (Banxico) is the central monetary institution of Mexico, which was established as a public law society with autonomy. In its power, is the mandate by the Mexican government to protect the stability and proper functioning of the Mexican financial system, as well as to protect the purchasing power of the Mexican peso.
Banxico is governed by the Bank of Mexico Law, published on December 23, 1993 in the Federal Official Gazette, following the country’s constitutional guidelines. This law tells us in principle about the nature, purposes and functions of the institution.
Nature of the Bank of Mexico
Regarding the nature of the institution, it can be found in article 1 of the Bank of Mexico Law.
In said article, it is indicated that the institution will be recognized as a person of public law with autonomous character and that it will be governed by the aforementioned law, which is also mentioned in article 28 of the Political Constitution of the United Mexican States. .
Regarding the purposes of the institution, can be found in article 2 of the Bank of Mexico Law.
In said article, it is indicated that the purpose of the institution is to provide the economy with national currency for its circulation. Following this aim, its objective will be to safeguard the stability of the purchasing power of the Mexican peso, as well as to promote the healthy development of the financial system and payment systems.
Regarding the functions of the institution, can be found in article 3 of the Bank of Mexico Law.
In said article, it is indicated that the institution will perform the following functions:
- Regulate the issuance and circulation of currency, as well as payment systems.
- Operate with credit institutions as a reserve bank.
- Provide treasury services and act as financial agent of the Federal Government.
- Act as advisor to the Federal Government in economic and financial matters.
- Participate in the International Monetary Fund (IMF) and in other international financial cooperation organizations.
- Operate with international organizations and central banks that exercise authority in financial matters.
Other functions of Banxico
- Issue monetary regulation bonds.
- Receive bank deposits from the Federal Government and from national and foreign financial entities.
- Carry out operations with currencies, gold and silver.
- Act as trustee.
- Perform the exchange of bills and coins in circulation, for others of the same or different denomination.
History of Banxico
On September 1, 1925, the Bank of Mexico opened its doors, being the culmination of a great desire awaited by Mexicans.
The creation of the institution ended a long period of monetary instability in the country, which had begun since the 19th century. During this period, in Mexico there was a system of diversity of banks that issued their own coins for circulation, resulting in a system that created mistrust in the Mexican currency and instability of the monetary system. However, it was aggravated after the consummation of the Mexican Revolution in 1910.
Once the aforementioned system collapsed, controversies began centered on issues such as the convenience of a monopoly institution and on a controlled currency issue, these being the characteristics that the Single Issuing Bank should have. This was how it was enshrined in article 28 of the Magna Carta promulgated in 1917. In this article, it was established that a central bank, under the control of the Government, would be in charge of issuing circulating currency.
Seven years after the enactment of the Magna Carta, the then-called Single Issue Bank was founded, due to a long shortage of public funds to be able to integrate the capital of the institution.
Banco de México Foundation
The founding of the Bank of Mexico became a reality in 1925, after efforts of the Mexican government of that time, when Plutarco Elías Calles was the current president of the Mexican republic, after the capital necessary for its constitution was met with efforts of the Secretary of Finance.
Thus, on September 1, 1925, the Banco de México was inaugurated.
From that moment on, the institution was given the power to create currency, as well as regulate monetary circulation, interest rates, and the currency exchange rate. Likewise, the new body became an agent and financial advisor and banker to the Federal Government.
Origin of the Bank of Mexico
Banco de México was established at a time of great aspirations for the country’s economy, as well as at a historical moment of great challenges.
Among the aspirations and challenges that the country was going through, the need for a new banking system, the reactivation of credit in the country and the reconciliation of the population with the use of the national currency, after the Mexican population experienced a traumatic inflationary experience with the use and circulation of the bilimbiques of the revolutionary period.
In the first six years, Banco de México faced various difficulties in consolidating itself as the country’s central monetary institution. However, in this period it achieved reasonable success in promoting and stabilizing credit in the business sector and the population.
As time progressed, the prestige of the new institution began to grow and made significant progress, but it also reflected a weak circulation of its banknotes in the territory and few commercial banks agreed to partner with it.
Mission and vision
Since its foundation, Banco de México has been endowed with autonomy to fulfill its main task, which is to ensure the stability of the purchasing power of the national currency.
- Mission: Banco de México’s main objective is to preserve the value of the national currency over time and, in this way, contribute to improving the economic well-being of Mexicans.
- Vision: To be an institution of excellence worthy of the trust of society for achieving the full fulfillment of its mission, for its transparent performance, as well as for its technical capacity and ethical commitment.