ABSTRACT
The reform of development banking was mainly aimed at improving state capacity. The state policy for development banking conformed to the 'neoclassical' postulates of economic liberalisation. The state under President Lazaro Cardenas promoted economic development very actively but more important, also created a financial circuit of state development banks alternative to the private banking dominated system. Development banks became organisations controlling large amounts of resources and delivering subsidised credit to politically sensitive groups within society. President Salinas and his inner circle of economic advisers established the general guidelines for the reform along with those for the structural transformation of the economy. The reform to development banking under President Salinas was made up of three main changes: specialisation of development banks in second-floor operations; reduction on state funding for these banks; and replace the public for the private sector as the main recipient of development funds.
