LatinFinance’s choice of Banamex as the best bank in Latin America this year veers a little toward value judgment over a strict financial analysis. Banamex, now Mexico’s second-largest bank, has made news twice this year. First, with its audacious and, ultimately, unsuccessful bid for its smaller rival, Bancomer. Second, and more important, Banamex became the first major Mexican institution to emerge from the wreckage of the 1994-1995 peso crisis that laid waste the entire banking system. This gives it a head start in the battle for growth in the industry.

Mexico has achieved high economic development rates following the peso crisis, but banking assets have not kept pace. In 1999, asset growth actually fell. New legislation governing credit, bankruptcy and e-commerce should accelerate lending expansion.

Banamex and its management team face a unique opportunity to reinforce themselves as a power in the local banking industry, just as foreign-owned banks close in. The Banamex team has made a strong start, justifying our Bank of the Year accolade.

Spain’s Banco Bilbao Vizcaya Argentaria, which won the bidding war for Bancomer in June, now controls the biggest bank in Mexico. Its rival, Banco Santander Central Hispano, owns the third-largest bank, Serfín, which it bought in a privatization auction in May. Citibank owns the smaller Confía, which it has integrated into its existing retail operation in Mexico.

Similarly, the presence of foreign banks in Brazil is also likely to grow. They already dominate in Argentina and Chile, where local banks owned by BSCH take our prize for best bank in each market.

Unlike their local rivals, these three international groups -plus London-based HSBC, Canada’s Scotiabank, ABN AMRO of the Netherlands and the Italian-owned Sudameris group – have formed pan-regional networks. In recognition of the growing importance of regional banks, this year LatinFinance has added a prize in this category. The magazine’s best pan-regional bank award goes to Citibank.

Although no Latin American bank can hope to match the big foreign groups in scale or access to capital, Jorge Londoño, head of Bancolombia, our award winner in Colombia, says that the foreign groups lack the intimate understanding of local markets and the powerful brand-name recognition that the national banks enjoy. Many Brazilian bankers say the Spanish banks and HSBC have over extended themselves and will have to retrench, perhaps even leaving Latin America altogether.

Two other new categories this year are best e-bank in Latin America-awarded to Banco Bradesco of Brazil-and best multilateral bank in the region, which goes to Caracas-based Corporación Andina de Fomento.

Banco Itaú of Brazil, which won our Bank of the Year prize in 1998 and 1999, is an example of how a strong, well-managed and profit-oriented bank can flourish in an often unstable environment. It remains the most profitable major bank in Latin America. Its financials are an example of transparency. Its first-rate management is open and communicates well with the markets. Its balance sheet is rock solid. Finally, Itaú is demonstrating an impressive ability to build loans aggressively as the Brazilian economy gathers momentum without, so far, taking excessive risks to grab market share.

Itaú faces challenges similar to those facing Banamex. It is a large, powerful bank, yet faces growing threats from the international groups. Itaú can take nothing for granted. The battle for survival is fought every day.