That, at least, appears to be the case for Oscar Rivera, the outgoing president of the Latin American Banking Federation, or Felaban, who spoke to beyondbrics during their 46th annual assembly in Peru’s capital, Lima. “Latin American banks are solid and liquid,” he said. “Most of all, they are stable.”
A penchant for protectionism has divided the region in two – the open economies of Colombia, Peru, Mexico and Chile; and more closed ones, such as Argentina, Venezuela, Ecuador and, increasingly, Brazil.
But ideology aside, Rivera believes that it was the strict enforcement of banking regulations that has helped the region leave its “lost decade” of credit busts and move forward.
“Shelves are packed with binders full of regulatory measures that have been put in place, unlike the United States and Europe,” he said.
Rivera likes to highlight Spain’s experience with Bankia, the nationalised Spanish lender that has come to symbolise the country’s broader economic woes.
“In less than a year they created one of country’s largest banks based on four institutions that went bust. If that’s the basis of a great bank, then there is obviously something wrong. If you make a sausage with rotten produce, you will get a sausage that tastes rotten,” he said.
According to Rivera, bankers from all over the world are increasingly looking at Latin America with great interest. The Peruvian and Colombian markets, in particular, keep seducing foreign institutions. In Peru, total assets of foreign subsidiaries stand at $37.1bn, with Colombia trailing behind at $33.2bn, according to latest issue of The Banker.
Historically, Spanish banks had a strong presence in the region, with aggregate assets totaling $495.5bn. “But some European banks with investments in Latin America, particularly Spanish banks, are selling assets around to generate a major capital infusion, to reinforce core capital,” said Rivera.
Increasingly, it is Colombian and Chilean lenders that are snapping up regional acquisitions. For Rivera, banking ties between Latin American countries are growing: “Capital mobility between neighbours is unprecedented.” Bancolombia, for example, has $11bn of foreign subsidiary assets in the region.
So how did banks in the traditionally impoverished southern hemisphere managed to give peers in the traditionally wealthy northern hemisphere a run for their money?
“Because of consumption, which is boosting growth,” said Rivera.
In recent years, the economic boom has allowed tens of millions of people in Latin America to move from lower to middle income levels. In his native Peru, where vigorous domestic demand and credit growth is such that the country’s central bank have become concerned over the strength of the sol, there are currently 16 banks but over 220 financial institutions, including cajas and microfinance lenders.
For him the top line is financial inclusion, in region that has been chalking up impressive growth rates. Latin America’s average is 47 per cent, with Chile at the helm with about 70 per cent. “We are resurging,” he says, “and that is good for the people.”
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