The Indispensable Service of Banks: Commercial Transactions, Industry, and Banking in Revolutionary Mexico

Abstract

Revolutions have important social, political, and economic consequences with which entrepreneurs have to cope to keep their businesses going. This may involve high transaction costs due to the violence that emerges as a result of armed conflicts. In this article we examine the effect that the Mexican Revolution (1910-1920) had on the banking sector and ultimately on bank clients, since revolutionary policies forced most banks to close their doors from 1915 to 1921. By focusing on a major textile firm, the Compañía Industrial Veracruzana, S.A., we observe that companies used nonchartered banks, which spread in the absence of government regulation, and foreign financial institutions, so that daily business operations could continue amidst the revolutionary upheavals.