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Tuesday, January 12, 2010
Today's News Headlines
* FMO to invest US$327mn in Latin America this year - Regional
* BancoEstado with US$250mn for subordinated bond issues in 2010 - Chile
* Retail credit demand down 1.2% in 2009, but up in H2 - Serasa Experian - Brazil
* Country accepts OECD invitation - Chile
* Moody's maintains negative credit outlook on banking system - Mexico
* Central bank crisis is another example of weak institutions: Moody's Economy.com - Argentina
* Citi names Latin America CEO to head Americas consumer banking - Mexico, Regional
* Government to lend US$27.6mn to micro enterprises, SMEs in 2010 - Guatemala
* Government looking to start bank for micro, small enterprises - Panama
* IN BRIEF Meirelles becomes BIS board member - Brazil
* IN BRIEF Société Générale hires Alejandro Cuadrado as Latin America economist - Regional
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* FMO to invest US$327mn in Latin America this year - Regional
The Netherlands Development Finance Company (FMO) plans to invest a total of 1.1bn euros (US$1.60bn) in 2010, of which approximately 225mn euros will be invested in Latin America, Jaap Reinking, business development manager at FMO's Latin American department, told BNamericas.
About 50% of those 225mn euros will be invested in the region's financial sector, he said.
In 2009, FMO invested 920mn euros, of which 165mn euros where invested in Latin America.
FMO has chosen to focus on low income and middle to low income countries.
"Therefore, we'll invest most in Central America, Colombia, Peru, Bolivia, Paraguay, Uruguay and some Caribbean islands," said Reinking.
FMO is the international development bank of the Netherlands and invests risk capital in companies and financial institutions throughout developing countries.
By Jorge Porter
Business News Americas
* BancoEstado with US$250mn for subordinated bond issues in 2010 - Chile
A US$500mn capitalization carried out by Chile's finance ministry in state-owned BancoEstado last year has left the bank with US$250mn available for subordinated bond issues in 2010, the bank's president José Luis Mardones told BNamericas.
The bank plans to keep issuing senior bonds in 2010 to match its long-term loans, especially mortgages, and there is also a plan to issue debt this year on international markets in the US$300mn-500mn range either in the US or a European market.
"We're already close to the limit among AFPs, so we need to diversify our sources of funding, looking for better interest rates," Mardones said. AFPs - the country's private pension fund managers - are the largest institutional investors in Chile.
As for the US$300mn-500mn bond the bank plans to issue overseas later this year, Mardones said that the entity will have an internal report ready in February, but that the timing for the placement is not urgent.
"We want to combine a placement in US dollars with a dollar-UF swap in order to have liabilities denominated in UFs," the executive said. The UF is the country's inflation-linked unit.
Thanks to the finance ministry's capitalization, BancoEstado finished 2009 with Basel capital adequacy ratio of approximately 12%.
POSSIBLE PARTNERSHIPS
Mardones also praised the bank's joint ventures with US insurance group MetLife (NYSE: MET) and French bank BNP Paribas, which allow the state bank to use its broad branch network to reach customers with low-cost insurance and mutual fund products, adding that BancoEstado is interested in developing the same model in other business areas.
MetLife signed a 20-year partnership covering the life business with BancoEstado in September 2004, as a result of which the former took a 49.9% stake in the bank's insurance brokerage, BancoEstado Corredores de Seguros, while BNP Paribas Investment Partners holds 49.99% of the BancoEstado asset management unit.
"We will not grow inorganically by purchasing banks, but through alliances in businesses where we can carry out joint ventures. Our philosophy is to look for partners that have similar features to what MetLife and BNP Paribas have, that is, being world leaders in the areas they operate in, having an expertise in the areas where we want to grow faster, and that have a business philosophy that is compatible with ours, which means products for all: simple, cheap and that can be sold through our branch network."
Mardones said that BancoEstado has been looking at potential partnerships for other business areas but that there has not been a real serious effort yet, so the bank will continue the search for new joint venture partners.
Thanks to an aggressive price reduction strategy, BancoEstado increased its loan market share last year to 16% from 13%.
BancoEstado is Chile's third largest lender.
By Jorge Porter
Business News Americas
* Retail credit demand down 1.2% in 2009, but up in H2 - Serasa Experian - Brazil
Retail credit demand in Brazil dropped 1.2% last year, but was up in the second half of the year, according to local credit information firm Serasa Experian.
Demand was down 6.8% in the first half due to the global crisis, yet rose 4.5% in the last six months of 2009.
In December alone, demand was up 1.6% on the previous month and increased 11.1% compared to December 2008.
At end-November retail credit totaled 465bn reais (US$269bn), up 1.3% on the previous month and rising 18.9% on end-November 2008, according to the latest figures from Brazil's central bank BCB.
By Business News Americas staff reporters
* Country accepts OECD invitation - Chile
Chile has become the Organization for Economic Co-operation and Development's (OECD) 31st member and the organization's first in South America under an accession agreement signed on Monday (Jan 11) in Santiago by OECD secretary general Angel Gurría and Chilean finance minister Andrés Velasco.
"The 'Chilean way' and its expertise will enrich the OECD on key policy issues," said Gurría during the signing ceremony in Santiago. "Chile has been engaged in a continuous effort to reform its economy. This experience will be an asset for the OECD as we try to address issues such as inequality or sustainable pension systems." The agreement requires ratification by congress.
Since it began talks with the OECD in May 2007, Chile has taken significant steps by introducing new laws to end the banking secrecy that provides a shield for possible tax evasion and enabling prosecutors to pursue companies suspected of bribery and corruption, OECD said in a press release.
"The Chilean economy has been growing at over 5% a year for the last 20 years. Impressive progress has been made in reducing poverty, although more still needs to be done. Chile's groundbreaking pension reforms in the early 1980s have served as a model for many other countries."
The OECD said that Chile's prudent tax policies gave it the necessary financial leeway for stimulus measures to support demand and employment when the financial crisis hit in 2008.
In recent months, and as part of the OECD accession process, competition laws and consumer protection in the country have been strengthened. New legislation has established a clear separation between the state and the board of copper mining company Codelco, Chile's largest state-owned enterprise, OECD noted.
In the private sector, a new law will boost transparency by requiring increased information for financial markets while combating misuse of insider information and reinforcing requirements for external auditors, the OECD said, adding that another major reform has seen the extension of public pension coverage.
The OECD will release its latest economic survey of Chile on January 21 in Santiago. The survey sets out the OECD's assessment and recommendations on the main economic challenges faced by Chile.
With both Chile and Mexico as members, and thanks to increasingly close cooperation with Brazil, the OECD said it will have substantially strengthened its links with Latin America. Four other countries - Estonia, Israel, the Russian Federation and Slovenia - are currently negotiating to become members of the organization, which is also working closely with other major economies, including China, India, Indonesia and South Africa, as well as Brazil.
By Business News Americas staff reporters
* Moody's maintains negative credit outlook on banking system - Mexico
Moody's has maintained its negative credit outlook on the Mexican banking system.
The negative outlook, which reflects Moody's views on the likely fundamental global credit conditions over the next 12 to 18 months, is tempered by the resilience of Mexican banks' financial strength ratings, the agency said in a press release.
Moody's believes that both anticipated and stressed loan losses could be absorbed in banks' Tier 1 capital and earnings.
Strengths of the system include banks' liquidity and provision levels, as well as ample capitalization.
Moody's sees the performance of banks' remaining under pressure in terms of asset quality and earnings but sees critical systemic stress as unlikely.
"We do not expect these banks to report net losses, but their loan growth for 2010 should remain particularly weak - most likely in the single-digit range given the weak economic recovery prospects and pressured labor markets, both affecting lending activity," senior credit officer David Olivares-Villagomez was quoted as saying in a report titled "Banking System Outlook: Mexico."
"Our main concern is centered on the risk that the economy will take longer to turn around, thus increasing the downside risks to bank activity," he said, adding "In particular, we believe that the full effects of the recession are yet to be manifested and will appear in the form of further - although manageable - pressures on bank asset quality and earnings."
Mexican banks' profitability is expected to remain under pressure in 2010, after new provisions effectively took nearly 58% out of banks' core earnings in 3Q09, and 2009 profits were largely sustained by difficult-to-replicate trading results, Olivares-Villagomez said.
For the full statement in English, go to this link (http://www.bnamericas.com/research_detalle.jsp?idioma=I&documento=1006956&id_sector=0)
For the full statement in Spanish, go to this link (http://www.bnamericas.com/research_detalle.jsp?idioma=I&documento=1006956&id_sector=0)
By Business News Americas staff reporters
* Central bank crisis is another example of weak institutions: Moody's Economy.com - Argentina
The crisis surrounding Argentina's central bank is another example of weak institutions among low-rated countries, Moody's Economy.com said in a report.
President Cristina Fernández de Kirchner last Thursday (Jan 7) fired the head of the country's central bank, Martín Redrado.
This institutional crisis has led to a legal stand-off, and is yet another indication of Argentina's weak policy framework, the report reads.
But it is not a sign of worsening credit quality. Argentina's B3 rating is already one of the lowest of all rated sovereigns and incorporates expectations of continued political turmoil. But the potential impact of the crisis on other policy measures, such as the government's proposal to resolve its current debt in default, could lead to credit worries in the future.
Last December, the Argentine government proposed tapping US$6.57bn in reserves to pay off public debt due in 2010. This was resisted by the head of the central bank, and led to threats of legal challenges by members of the opposition.
Last week the crisis reached a boiling point, when the country's president first asked for the central bank president's resignation. Redrado refused, and a day later he was fired by presidential decree. The courts have since reversed the decree, and it's likely the judiciary will continue to be involved.
According to Moody's Economy.com, weak institutions are common among low-rated countries, and in Argentina's case political and policy implementation concerns are a key ratings constraint.
"So today, the major concern is not the intended use of the reserves (meant, after all, to pay back debt) or even the political theater resulting from all of this. But Argentina does need to resolve outstanding issues, such as its debt in default, that continue to raise concerns about its willingness to pay," the report reads.
"If that is derailed by the current political crisis, financing options may become problematic later this year."
By Business News Americas staff reporters
* Citi names Latin America CEO to head Americas consumer banking - Mexico, Regional
Citigroup (NYSE: C) has appointed Manuel Medina-Mora as CEO of Citi consumer banking for the Americas and chairman of Citi's global consumer council.
He will take over as head of North American consumer banking from Teresa Dial, who is stepping down.
Medina-Mora will also maintain his role as chairman and CEO of Citi Latin America and Mexico, the bank said in a press release.
In his new role as CEO, the executive will oversee Citi's retail branch network, branded cards business and local commercial banking in the Americas. In his role as chairman of Citi's newly formed consumer council, he will be responsible for the bank's global consumer strategy and will work with all regional CEOs.
Medina-Mora has been chairman and CEO of Citi Latin America since 2004. He has also been CEO of Mexican financial group Banamex since 1996, prior to Citi's purchase of the group in 2001.
The executive has a bachelor's degree in business administration from Mexico's Universidad Iberoamericana and an MBA from Stanford University.
By Business News Americas staff reporters
* Government to lend US$27.6mn to micro enterprises, SMEs in 2010 - Guatemala
Guatemala's economy ministry will provide over 230mn quetzales (US$27.6mn) in lending to micro enterprises and SMEs in the country in 2010, the presidency said on its website.
Of that amount, rurally focused bank Banrural has already received 20mn quetzales for microloans to families organized through the government's social cohesion committee (Consejo de Cohesión Social), according to deputy economy minister Erasmo Velásquez, who added that another 170mn quetzales will be used towards the same end.
In 2009 the government contributed 86mn quetzales to microcredit, on top of 360mn quetzales in lending through the social cohesion committee, which coordinates government spending on social programs.
Those who wish to receive a microloan can present their projects to any economy ministry office or Banrural agency, the report said.
By Business News Americas staff reporters
* Government looking to start bank for micro, small enterprises - Panama
Panama's cabinet on Tuesday (Jan 12) will review the creation of a bank focusing on lending to micro and small enterprises in the country.
The bank, which would lend to banks already specialized in credit to such companies, would be started with a fund of US$25mn, commerce and industry minister Roberto Henríquez was reported as saying Monday morning on news show Telemetro Reporta.
In the country, 90% of companies fall into the category of micro and small businesses, and as they are considered high risk, have difficulty obtaining financing, Henríquez reportedly said.
The bank will be a component of the government's Impulso Panamá project.
By Business News Americas staff reporters
* IN BRIEF Meirelles becomes BIS board member - Brazil
Brazil's central bank BCB president Henrique Meirelles has become a member of the board of directors at the Basel-based Bank for International Settlements (BIS), the central bank said in a statement.
Meirelles joins the board which includes famous central bank heads such as Ben Bernanke and Jean-Claude Trichet.
The board is responsible for determining the strategic and policy direction of the BIS, supervising the management and fulfilling specific tasks given to it by the BIS statutes.
By Business News Americas staff reporters
* IN BRIEF Société Générale hires Alejandro Cuadrado as Latin America economist - Regional
French bank Société Générale has appointed Alejandro Cuadrado as Latin America economist, a bank spokesperson confirmed to BNamericas.
Cuadrado will be responsible for developing fundamental macroeconomic research and producing in-depth political analysis with a focus on Latin America's core countries. He will be based in New York, spokesman Jim Galvin said in an e-mailed statement.
He joined the firm from Bank of America - Merrill Lynch (NYSE: BAC) where he worked as Latin America economist starting in 2005 and resigned in November 2008. He previously worked for the Latin America sovereign ratings group at Standard & Poor's and has been a consultant for the Inter-American Development Bank (IDB) and the European Union. He reports to Stephen Gallagher, Société Générale's chief US economist.
By Business News Americas staff reporters
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In-deph interview
* BES follows Bradesco's bet on Brazil
Ricardo Espírito Santo
CEO
BES Investimento do Brasil
Brazil
http://www.bnamericas.com/interviews/banking/Ricardo_Espirito_Santo_,BES_Investimento_do_Brasil,/169479486
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Main companies covered in today's news
* Corp Group Banking S.A.
http://www.bnamericas.com/company-profile/en/Corp_Group_Banking_S,A,-Corp_Group/169479486
* Principal Financial Group Inc.
http://www.bnamericas.com/company-profile/en/Principal_Financial_Group_Inc,-Principal/169479486
* Fitch México S.A. de C.V.
http://www.bnamericas.com/company-profile/en/Fitch_Mexico_S,A,_de_C,V,-Fitch_Mexico/169479486
* Banco Central do Brasil
http://www.bnamericas.com/company-profile/en/Banco_Central_do_Brasil-BCB/169479486
* Société Générale
http://www.bnamericas.com/company-profile/en/Societe_Generale-Societe_Generale/169479486
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