Like many other U.S. banks in communities that hug the Rio Grande, International Bank of Commerce in Laredo, Tex., depends on trade with Mexico.

The $4.5 billion-asset bank says more than half of its loans are connected to such trade, largely through direct financing for importers, exporters, shippers, and foreign factories. Business has been especially brisk since the North American Free Trade Agreement was ratified in late 1993, said president Dennis E. Nixon.

"It's difficult to separate out our international business from our domestic business," said Mr. Nixon, who is also chairman of the holding company, International Bancshares Corp. "Almost everything we do has some kind of international component to it."

The election of a new president in Mexico could create even more opportunities for U.S. banks such as International Bank of Commerce.

Bankers such as Mr. Nixon express confidence that Vicente Fox - a member of the National Action Party who ended the 71-year reign of the Institutional Revolutionary Party with his victory in early July - will follow through on his pledges to reform Mexico's economy.

Mr. Fox, who plans to meet with President Clinton at the White House next week, has committed himself to boosting annual economic growth to 7% from an expected 4.5% this year and to strengthening its banking system. That could lead to more long-term opportunities for U.S. banks, especially those near the 2,000-mile border.

International Bank of Commerce already has about $100 million of outstanding loans to maquilladoras - foreign factories in booming Mexican industrial cities such as Monterrey that are typically owned by American, European, or Japanese firms. If, as expected, more maquilladoras open, they would create more opportunities for loans.

"As their economy grows and prospers we can provide more services," Mr. Nixon said.

Other banks are similarly bullish about their prospects south of the border.

San Diego-based First National Bank said it expects to double the number of loans it makes to Mexican companies next year as a direct result of Mr. Fox's election. The $520 million-asset bank said it now makes about $100 million of Mexican loans a year.

"Mexico is one of the finest opportunities for banks," said Leon H. Reinhart, First National's president and chief executive officer. "Almost nobody is focusing on international trade," because most banks have been targeting crowded fields like domestic small business and real estate.

U.S. banks say they typically make more money on loans connected to Mexican trade because they charge higher interest rates due to the risks associated with working in a developing country.

U.S. banks, whether they work in tandem with a Mexican bank or offer a loan directly to a Mexican business, must factor in currency-exchange risk - even if they lend only in dollars. Because the Mexican firm might earn its money in pesos, it could be difficult to repay a loan if the peso drops in value.

International Bank of Commerce requires that its lenders speak both Spanish and English and be conversant with Mexican and U.S. banking laws.

Mexico's laws "are not overly complicated," Mr. Nixon said. "Bicycle riding is not overly complicated either, but it can be until you learn how to do it."

Like International Bank of Commerce, $6.9 billion-asset Frost National Bank in San Antonio does some financing direct to maquilladoras. But Frost, the lead subsidiary of Cullen Frost Bankers Inc., also works in conjunction with five or six Mexican counterparts in partnerships similar to syndicated loans. The Mexican banks borrow money from Frost and lend it to their business customers.

"It's a good opportunity for us," said Frank Martinez, a Frost National senior vice president. "We have a personal relationship with those banks, and they know their customers. We're able to lend to a wide variety of businesses this way."

Mr. Martinez acknowledged some banks avoid going into Mexico because of misconceptions that it is a backward country with "nothing but a bunch of cactuses."

In reality, the Mexican economy has picked up steam. Companies such as General Electric, Toyota, and Thomson Consumer Electronics (manufacturer of RCA televisions) have opened or expanded Mexican factories in recent years. Another $12 billion in direct foreign investment from companies such as Goodyear Tire and Rubber is expected this year, according to a survey by the Mexican Investment Board.

Mexico is now the United States' second-largest trading partner, according to the U.S. Trade Representative's Office. The two countries exchanged roughly $197 billion worth of goods and services in 1999, nearly double the volume of five years earlier.

The Mexican economy could pick up the pace further, especially if Mr. Fox standardized the country's currency on the dollar, thereby reducing the lending risk for U.S. banks, said John R. Patton, an associate professor of management at Florida Institute of Technology in Melbourne.

Mr. Patton said that despite the opportunities created by Nafta, most banks in this country have shied away from Mexico since the 1994 peso devaluation and the subsequent liquidity problems in the Mexican banking industry. In recent years Mexico has been in the midst of a $100 million bailout of what Mr. Patton called its "wobbly bank sector," which he said he believes the new president is prepared to shore up.

Still, U.S. banks say they stand to gain whether Mexican banks improve or not. If Mexico's banks become more stable, U.S. banks could work more closely with them. If Mexican banks do not improve, U.S. banks are a good alternative for companies in Mexico or doing business with Mexico.

"The American banking system is one of the safest in the world," said David Zalman, president of Prosperity Bank, the lead subsidiary of $592 million-asset Prosperity Bancshares in Houston. "If you're somebody trying to do business in Mexico," he said, "I would rather my letters of credit be issued by an American bank."

Mr. Zalman would know. Besides working at the bank, he also is a leading partner in ICM Manufacturing, an El Campo, Tex., company that makes children's pajamas.

ICM, a privately held business with more than $10 million of annual revenues, uses a $1 million credit line from Prosperity Bank to produce apparel at its sole factory in El Campo and to outsource production to developing countries. Besides looking to Mexico for manufacturing opportunities, ICM also exports some of its wares south of the border.

"Banks are evolving out of necessity for customers that trade and operate on both sides of the border," Mr. Zalman said. "We already take it for granted that more and more of our business customers are tied to international trade."

Katie Kuehner-Hebert contributed to this article.

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