'A blue-chip firm in Korea, a startup in Mexico — Shinhan fills that gap'

"When a Korean company in Mexico walks into a local bank and asks for a loan, the answer is blunt: 'Why should we trust you?' Even the most solid small and midsize firms back home hit a wall here — the gateway to North America — simply because they have no global credit rating. Filling that financial gap and building a mutually beneficial ecosystem is exactly what Shinhan Bank Mexico is here to do."

Kim Hyeong-gyu, branch manager of Shinhan Bank Mexico's Monterrey branch, laid out the financial reality facing Korean companies in Mexico during an interview at his office in San Pedro, Monterrey, on June 26 (local time). While the Mexico City head office handles communications with regulators, he said the Monterrey branch serves as the frontline operation that deals directly with customers and manages day-to-day banking.

Shinhan Bank first entered Mexico in 2008 and in 2018 became the first Korean bank to begin local operations there. In 2024, it opened its first branch in Monterrey, the country's largest industrial city in the north. Kim joined Shinhan Bank Mexico in July 2021 and has since overseen the growth of the initial Monterrey office and its conversion into a full branch.

Monterrey has emerged as a hub for nearshoring — the relocation of production bases to neighboring countries — driven by the reshaping of North American supply chains, and is widely regarded as Mexico's most active city for manufacturing investment. Korean conglomerates and their suppliers have followed, with Kia, Hyundai Mobis, LG Electronics, Seoyon E-hwa and Mando among those that have set up operations there. The smooth functioning of this vast industrial cluster depends heavily on small and midsize suppliers finding their footing, yet the financial environment they face is far from welcoming.

"Unlike large corporations that can tap global capital markets, small and midsize suppliers find it extremely difficult to clear the bar at local banks," Kim said. "No matter how sound a company is in Korea, Mexican banks see it as nothing more than a newly incorporated entity with a short track record."

The problem is particularly acute when companies need large sums to secure a site and build a factory. In Korea, it is standard practice for banks to cover 70 to 80 percent of such costs against a 20 to 30 percent equity contribution — but that consensus does not exist in Mexico. Even if a company explains that it is a key vendor for Kia with guaranteed future sales, local banks will not extend credit without tangible collateral or an established local track record.

"We, on the other hand, have built up deep experiential knowledge of Korea's industrial cluster ecosystem," Kim said. "We work to find tailored financial solutions for companies that want to produce and operate as part of that ecosystem here on the ground."

Shinhan Bank Mexico has in practice been stabilizing the broader supply chain by providing financing that allows small and midsize firms — turned away by local banks — to install machinery and set up production lines. Last year, the bank also extended five or six loans to small Korean-owned businesses within the industrial cluster.

The Monterrey branch, which marks its second anniversary this July, is widely regarded as having established itself successfully in the local market. Situated close to the industrial sites where its customers are concentrated, it has earned a reputation for providing fast, accurate guidance on Mexico's often unfamiliar and complex financial regulations and practices.

The branch also offers non-banking amenities — multiple meeting rooms, high-speed Wi-Fi and printers — so that newly arrived companies can use the space as an informal base before securing their own offices. The response from business owners has been strong, with many saying the facility has been a genuine help.

"Corporate banking in Korea is a zero-sum battle where banks fight to poach each other's clients," Kim said. "In Mexico, there are enough business opportunities just by targeting companies that are newly entering the market. We grow alongside companies at the starting line — like rain falling on parched ground."

Mexico's banking sector comprises 52 institutions, but the top seven banks command more than 70 percent of total assets and earnings, giving them an oligopolistic grip on the market. As more Korean companies enter Mexico, major local banks have begun setting up dedicated Korean corporate units.

Against this competitive backdrop, Shinhan Bank Mexico plans to sustain its growth by diversifying its product lineup and attracting new customers. Among the initiatives under consideration are the launch of a factoring product — loans secured against accounts receivable — and the issuance of standby letters of credit.

The standby letter of credit is a key instrument for supporting companies operating under the maquiladora regime, Mexico's export-manufacturing system that allows foreign firms to import raw materials and components duty-free, assemble or process them locally, and then export the finished goods. The maquiladora has become an important pillar of North American manufacturing.

"Companies that enter through the maquiladora regime face a dilemma," Kim said. "Their physical assets — factories and the like — are in Mexico, but their parent company is in the United States. US banks won't lend because there are no local assets, and Mexican banks won't lend because the company is seen as a mere subcontractor."

That gap is precisely what Shinhan Bank Mexico is targeting. The bank is designing a linked financing structure in which it issues a standby letter of credit backed by physical assets in Mexico and sends it to Shinhan Bank America, where the actual loan is then extended. "We are working closely with the head office's credit review team, with a goal of closing a deal in the first half of this year," Kim said.

Although the bank's business is currently centered on Korean-affiliated companies, Shinhan Bank Mexico already has its sights set further afield. Its ambition is to expand its financial reach to companies from around the world that use Mexico as a production base.

"Shinhan Bank's decision to come to Mexico ultimately started with one question: how do we crack the vast US market?" Kim said. "The countless global companies looking to enter Mexico — the world's factory — are our potential customers going forward."