LATMPG members settle on agenda topics for upcoming June meeting.
Argentina, tightening FX controls and how to manage the associated FX risk therein are top of mind for members of The NeuGroup’s LatAm Treasury Managers’ Peer Group as they gear up for their spring 2012 meeting.
Members will also compare notes on defensive actions and managing trapped cash in Venezuela and will benchmark their Brazilian hedging programs. Cash management and supply-chain finance is also on the agenda.
Following a round of introductions of key projects and priorities, the group will tackle:
Topic 1: Argentina Economic and Market Update, FX Regulations
Due to recent resolutions passed about dealing in the FX markets, particularly as it pertains to buying US dollars, in combination with various other negative business developments, a discussion on how to deal with this new environment is timely.
- Best practices in speeding up collections and reducing FX risk due to delayed collections.
- ARS devaluation risk.
- Overview of developing “parallel market” similar to Venezuela, making use of the bond market.
- What opportunities are there in contracting in non-USD? BRL, for example?
- Achieving the required import/export balance, possibly through contract manufacturing
- Control issues when bank accounts are opened by or jointly with broker/agents.
- Investing local cash; what are acceptable investments?
Topic 2: Supply Chain Financing in Latin America
A continued look at SCF in the region and Bank of America Merrill Lynch’s capabilities and services in this area.
- Moving on from setting up SCF programs in Asia and the US to dealing with demand for it in LatAm.
- Systems and conventions in global vs. local programs.
- Best practices and lessons learned.
- Arm’s length issues and accounting concerns (e.g., debt classification).
- Sponsor’s supply-chain services and capabilities.
Topic 3: Cash/Liquidity and Working Capital Management
Members are interested in fleshing out “best practices” vs. available products and services in the area of USD/local liquidity and working capital optimization.
- In-country target safety-margin calculations and dealing with country regs and restrictions.
- Government actions/trends and dealing proactively with them.
- Brazil: interco loans and the IOF tax.
- Initiatives to optimize cash conversion cycle; goals/metrics (DSO, DPO, inventory, etc.).
- USD liquidity management and update on pooling opportunities; tax implications of cross-border pooling.
Topic 4: Benchmarking Brazil Hedging Strategy
With the cost of hedging high, treasury faces pushback on hedge decisions. What is the proper hedge ratio? Who bears the hedge results?
- Hedging with forwards: are there better, more cost-effective ways?
- Optimal hedge ratio; how do you know?
- Getting buy-in for the corporate hedge philosophy.
- Review of whether corporate or subs own hedge results; performance incentives.
- Who bears the cost of hedging and how does that influence hedge decisions?
Topic 5: Venezuela update
Elections are coming in the fall. What are the possible outcomes and associated risks and opportunities for companies doing business there?
- Economic and political outlook.
- Status of CADIVI, SITME, bond issues and financial market in general.
- In-depth look at companies’ attempts to repatriate cash.
- How are member companies affected by and dealing with Government price controls, if at all?
There will also be an open forum for timely topics not on the agenda.
The LATMPG spring 2012 meeting will begin with breakfast on June 12th and end with lunch on June 13th. Held in Miami, the event is sponsored by Bank of America Merrill Lynch. For information on how to join the group, please contact [email protected].