June 17, 2010
A roundup of topics International Treasurer is investigating.
Three topics that International Treasurer will be following stem from The NeuGroup’s Latin American Treasury Managers’ Peer Group meeting this week. The fourth topic, concerning OTC derivatives, is indicative of the growing consensus that the financial reform legislation addressing them is nearing the finish line.
- Venezuela’s new foreign exchange regime. Venezuela is always a source of concern, so much so that the name itself has become almost synonymous with treasury headaches. But the recent changes to the foreign exchange system, starting with Chavez’s apparent takeover of the parallel market, and new threats of government appropriations of private sector firms have reached a new level. While it will take a few weeks to see to what extent the new foreign exchange regime can be made to work for companies that still have profitable businesses in the country, there is a growing concern that Chavez is far enough down the path to Cuba that he will no longer allow the workarounds that he has in the past.|
- Bringing Brazil in from the cold. As the outlook for Venezuela gets ever more pessimistic, the outlook for Brazil keeps getting better. The consensus is that its economy is sound enough that it will be an engine not just for regional growth, but also an important contributor to the global economy. As a result, more and more multinational treasuries that had kept Brazil outside their global cash and payments infrastructure—at least on a fully integrated basis—are finding ways to bring Brazil in. To be sure, the anomalies of treasury operations in Brazil that kept it apart are still present, e.g., onerous tax and financial regulations. However, because of its growth prospects, the major global transactions banks have come up with solutions to help treasurers work through these issues and link in Brazil more readily via their banking systems and SWIFT to more centralized treasury management setups. That said, the need for a separate Brazil treasurer has not gone away. It’s still Brazil.
- Bank connectivity strides. Part of what is making it possible to include Brazil in global treasury infrastructure is the payoff from investments global banks like HSBC have been making to improve corporate connectivity—both with their existing banking platforms and via SWIFT pipes. Pursuing growth in emerging markets has also brought that investment to places like Brazil, where global banks have acquired local banks and worked to integrate their local systems, interfacing with local accounts and branch networks, with global platforms. Thus, treasurers should look for ever improving visibility over cash in these markets and eventually the ability to move cash and initiate payments from common screens.
- OTC derivatives. The final push is on to pass financial reform legislation, so the corporate derivatives end-users who have been active in lobbying are also working hard to make sure their case for exemptions and other considerations in moving derivatives to central clearing are not lost in the sprint.