May 10, 2012
Navigating Latin America
Thrusting and Parrying in LatAm’s Tricky Environment
The thirteenth meeting of the LATMPG included country-specific discussions of Brazil, Argentina, Mexico and Peru, in addition to broader topics of counterparty risk and bank connectivity.
1) Brazil and Argentina Updates. Both Brazil and Argentina regulatory frameworks are complex and change frequently.
Key Takeaway: In Brazil, the IOF reduction to zero on FX purchases is good, but the IOF on investments is still there. In Argentina, a requirement to balance imports and exports could force firms to manufacture locally or reduce imports.
2) SWIFT and Bank Connectivity. An overview of connectivity options.
Key Takeaway: Treasury has made significant strides toward process standardization and automation, in order to decrease manual processing, mitigate risk and reduce costs. Part of this effort relies on standardized messaging, which at least in theory would allow companies to change banks as needed.
3) Mexico and Peru Updates. Members discussed treasury and risk management challenges in Mexico and Peru.
Key Takeaway: In Mexico, current market conditions are favorable for MNCs to explore alternative fundraising. Limited local bank capabilities present challenges in Peru.
4) Counterparty Risk. Members discussed methods of tracking and limiting exposure to any given bank counterparty.
Key Takeaway: Judgment and caution must compensate when using a lower-rated bank.
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