Governments in Mexico have been trying to replace cash with digital payment alternatives for over a decade, and have largely failed. Until now…
President Claudia Sheinbaum is on a mission to reduce cash use in Mexico, until now one of the world’s most cash-friendly countries, in the shortest possible window of time. Speaking at the recent 89th Banking Convention in Cancún, on March 19, she unveiled plans to eliminate the use of cash in key strategic sectors, beginning with gas stations and toll booths.
“Our goal this year is to make digital payments for gasoline and tolls mandatory,” the president said. “This will allow us to move forward with the digitization of the country through other schemes.”
Shienbaum praised recent improvements to the so-called “CoDi” system which can now be accessed through cell phones with zero commissions. CoDi (Cobro Digital) is a free, real-time digital payment platform developed by the Bank of Mexico, or Banxico, that has drawn comparisons with Pix, Brazil’s hugely popular instant payments system that has managed to enrage (and terrify) both Wall Street and Silicon Valley, and by extension, Donald Trump.
Other speakers at the event included former Canadian Prime Minister Justin Trudeau, who spoke about “Global Leadership and Transformation” as well as representatives of Mexico’s biggest banks, BBVA, Santander, HSBC, Scotiabank and Banorte. Also in attendance were Ryan McInerney, CEO of Visa, and Tim Murphy, Vice Chair of Mastercard.
Needless to say, eliminating cash payments from gas stations and toll booths in the next nine months is a tall order for a country where cash is used for roughly 80% of all transactions, making it arguably the G20’s most cash-dependent economy. Governments in Mexico have been trying to replace cash with digital payment alternatives for over a decade, to little avail.
But the banking sector, dominated by foreign lenders like BBVA, Santander and Scotiabank, continues to lobby for digitisation policies to reduce the use of cash, especially payments for public services. As we have discussed many times before, the move towards digital payments systems, particularly central bank digital currencies (CBDCs), is being pushed globally by organisations like the IMF, the WEF and the Bank for International Settlements (BIS).
As readers may recall, it was the Mexican central banker Agustin Carstens who, in his former role as chairman of the BIS, famously explained, with disarming candour, why central banks are so determined to introduce CBDCs across the world (spoiler alert: it’s all about control):
“We don’t know who’s using a $100 bill today and we don’t know who’s using a 1,000 peso bill today. The key difference with the CBDC is the central bank will have absolute control [over] the rules and regulations that will determine the use of that expression of central bank liability, and also we will have the technology to enforce that.”
In an interview with Bloomberg, the head of the Mexican Banking Association, (ABM), Emilio Romano, said Mexico’s central bank is preparing to publish protocols to drive the adoption of payments sent by mobile phones.” One of the reasons these changes are being pursued, he said, is that in Mexico “roughly 85% of small transactions are done in cash”.
This, according to the bank lobbyist, is largely due to “Mexicans not trusting their government and seeking to avoid taxation.” Which is one interpretation. Most times I ask Mexicans why they use cash so much, they tell me it’s because they don’t trust the banks. This is perhaps no surprise given the number of systemic banking crises the country has suffered, most recently in 1982 and 1994.
President Sheinbaum provided more details of her government’s anti-cash agenda in yesterday’s morning press conference, explaining that the ultimate goal is to transform the way transactions are carried out in the country. The primary goal, she said, is to move towards a more formal economy, in which operations are easier to track (and tax).
The government also seeks to expand access to financial tools for sectors that have historically been outside the banking system. Sheinbaum cited China and Brazil as examples to follow. Both BRICS members have significantly reduced the use of cash over the past decade or so. But they have done so gradually whereas Sheinbaum wants to do it at breakneck speed…
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Nick Corbishley 