To understand the true character of many of our corporations, you have to look at what they do in other countries—not here, where regulations, public opinion and a government that hasn’t yet lost its last vestige of political sensitivity exercise some restraining influence.
Remember when Wal-Mart began moving to open banks in the U.S.? That plan hasn’t yet worked out. But Wal-Mart did open banking operations in Mexico, complete with credit cards Mexicans can use to buy Wal-Mex merchandise like washers and refrigerators.
At interest rates of 60 percent.
It’s not difficult for Wal-Mex to charge interest that would embarrass Tony Soprano because rates of 35 to 75 percent, with annualized returns sometimes hitting 100 percent, are common south of the border. Lenders there, many of whom got their start not in Mexico but in the U.S. (CitiBank and Wal-Mart), Canada (Scotiabank), Britain (HSBC) and Spain (Bancomer and Santander), say they have to charge high interest rates because Mexicans are inexperienced at using the cards and often default.
But some observers suspect that they do it just because they can. Bernardo Garza, credit marketing manager for GE (General Electric) Money Mexico, which handles credit cards for several U.S. chain stores in Mexico, talked to USA Today in 2008, when Wal-Mex’s cards were drawing over 69 percent interest. “I believe banks are covering a little bit for a higher risk than that in the U.S.,” Garza said. “But on the other hand, I also believe & that banks and also financial institutions who offer cards see an opportunity there and are trying to get the most out of it.”
Last year, a coalition that brought together consumer activists and Catholic churchpeople in Mexico demanded that the government limit the card fees that sometimes put people in thousands of dollars’ worth of unclearable debt (Mexicans earn an average of around $750 a month). A law passed in February gave the central bank the right to limit bank and credit card fees, and now some bank fees have been lowered—a development that suggests that credit card fees may be reined in soon.
Meanwhile, as CorpWatch reported last year, “The profits from Mexico’s credit card bubble have been flowing north to U.S. financial giants and across the Atlantic to Europe’s money centers.”
In credit card news stateside, the financial reform bill makes it illegal for credit card companies to stop retailers from offering discounts to customers who pay with cash—a development that may help shoppers wean themselves away from plastic.”
