May 18, 2011
A Positive Outlook
After a Quick Recovery, Latin America Looks Ahead
When members of The NeuGroup’s LatAm Treasury Managers’ Peer Group (LATMPG) came together for their meeting in January, in addition to the macroeconomic overview of LatAm and an update on Venezuela, discussion topics included:
1) FX Risk Management and Hedging: Members discussed strategies and instruments available for cost-effective FX hedging.
Key Takeaway: Companies overwhelmingly prefer forwards over options, but lower levels of volatility make options more affordable.
2) M&A Integration Lessons and Best Practices. Members discussed their experiences with divestitures and acquisitions.
Key Takeaway: Divestitures are extremely resource intensive and require the attention of a trustworthy investment bank; a particular member’s treasury acts as a “help desk” to quickly integrate acquisition targets and train their human resources.
3) Treasury Centralization. The key question posed by members: how much centralization is too much centralization?
Key Takeaway: In LatAm, companies have begun stepping back from a fully centralized model to accommodate business-need realities.
4) Local and Cross-Border Cash Management Best Practices. A look at how companies can utilize their liquidity to fund their LatAm operations, e.g., in Brazil.
Key Takeaway: Cross-border pooling remains problematic in all but a few jurisdictions; the change of pace on this is likely to be slow.
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