Empirical Evidence on the Efficiency of Latin American Banks

The Latin American banking sector has undergone a transformation in recent years because of changes in regulation and globalization as well as developments in telecommunications and information technology. A very important example of this has been financial liberalization wherein Latin America opened its doors to foreign banks. An important issue that needs to be addressed is whether the operations of local commercial banks in this region are operationally efficient enough to be economically viable in a highly competitive environment. The objective of this study is to examine the factors behind bank profitability following financial liberalization in five countries, Honduras, Mexico, Paraguay, Peru, and Venezuela, using 2004 financial data.