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2? The Largest Banking Network in Latin America
BS International (Miami)
Banco Santander Serfin
BS Puerto Rico
BS Panama
Banco de Venezuela
Banco Santander Banespa
BS Colombia
Banco Asuncion
Banco Santa Cruz
BS Uruguay
Banco Santander Santiago
Banco Rio de la Plata
3? Latin America - Keep in mind that
- We are not talking about a single homogeneous
market - GDP growth is well below that of the early
1990s, but the market reforms of the period
remain and are continuing - The demand for Australian products and
services remains strong, but is influenced by the
availability of finance - These are not opportunistic markets -
success requires prudence and perseverance make
the commitment - A sizeable market, with significant needs and
long-term potential the rewards can be
substantial
4? Consistency in GDP Growth is a problem
5? Demand is constant, but access to credit is the
key
6? Latin America is susceptible to external shocks
- What went wrong at the end of the 90s? A
combination of severe external shocks and weak
fundamentals - The external shocks include
- The slowdown in the world economy and the
associated fall in the price of primary
commodities - The sharp decline in capital inflows and the
retreat in direct foreign investment.
7? Latin America requires further reform
- Internal weaknesses, with a direct bearing on the
crisis, include - Fragile fiscal positions (that became worse,
and in some cases, unsustainable after the
shocks) - Rigid labour markets and shallow domestic
capital markets (that made adjustment unduly
costly) - Hidden risks in the banking systems
- Financial systems badly prepared to deal with a
sudden halt in capital inflows and with swings in
interest and exchange rates - In some countries, a combination of rigid
exchange rate, weak fiscal conditions and rigid
labour markets
8? Why Latin America? - Consumers Demand
Country Population GDP Imports
(m) (USbn) (USbn) Argentina
37 108.5 (9.0) Brazil 175
440.8 47.2 Chile 15 66.4
15.8 Colombia 43 81.1
12.1 Mexico 100 627.9 168.7 Peru
26 56.8 7.4 Venezuela
24 88.3 12.3
9? Look beyond the short-term see the rewards
10? How to view the markets - its a question of
perspective
- Dont base your decisions solely on media
coverage - it only tells part of the story - Approach the markets as you would any market
elsewhere - - - research your target market
- - verify your findings as far as possible
- - ensure that your strategy is appropriate
- - exercise due caution to ensure payment
- - make the requisite commitment - visit the
market regularly - Dont be afraid of Latin America - it is
more user-friendly than other markets that are
popular with Australians
11? Latin America is a worthwhile destination
12? Latin America is a worthwhile destination
13? Our trade with the region is negligible
14? Snapshot Argentina
- Inflation rate 40.6 (annual rate to Nov. 02)
- Interest rate 19 (domestic bank deposit
rate) - US dollar value 2.84 Pesos (as at April 23)
- Recession is beginning to ease
- Inflationary pressures are contained
- Strengthening of the exchange rate
- Political uncertainty remains
- Industrial activity is recovering
- Private consumption remains depressed
- Economic recovery will be very gradual
15? Snapshot Brazil
- Inflation rate 10.9 (annual rate to Nov. 02)
- Interest rate 23 (domestic bank deposit
rate) - US dollar value 3.03 Reais (as at April 23)
- Favourable market response to Lula government
- Fall in country risk - Strong growth in economic activity in 2nd half
of 2002 - Currency has depreciated thereby enhancing
export competitiveness - Potential downside of depreciation is
inflationary pressures - Resulting Central Bank tightening likely to
curtail expansion - Political pressures may build throughout the
remainder of year
16? Snapshot Chile
- Inflation rate 3.0 (annual rate to Nov. 02)
- Interest rate 2.8 (domestic bank deposit
rate) - US dollar value 713 Pesos (as at April 23)
- Signs of recovery in private consumption
- Interest rates likely to remain low
- Economic sentiment remains low -
expectations too high - Lower oil prices and higher copper price have
improved terms of trade - Awaiting ratification of FTA with US
17? Snapshot Colombia
- Inflation rate 5.7 (annual rate to Nov. 02)
- Interest rate 7.9 (domestic bank deposit
rate) - US dollar value 2,911 Pesos (as at April 23)
- Economic activity is recovering
- Low interest rates favourable monetary
policy are in place - Strong international political, military and
financial support - Affected negatively by economic problems in
Venezuela - 2nd-ranked trading partner - Violence persists
18? Snapshot Mexico
- Inflation rate 5.4 (annual rate to Nov. 02)
- Interest rate 2.9 (domestic bank deposit
rate) - US dollar value 10.51 Pesos (as at April 23)
- Remarkable solvency has resulted in reduction
in external debt - Only moderate volatility expected on the
currency and interest rate markets - Affected by the sluggishness of the US economy
- Slow advances are expected on the structural
reform agenda - Inflation projections higher than Central
Banks target - likely to result in restrictive
measures
19? Snapshot Peru
- Inflation rate 1.5 (annual rate to Nov. 02)
- Interest rate 5.4 (domestic bank deposit
rate) - US dollar value 3.46 Soles (as at April 23)
- GDP grew 5 YoY in first two months of 2003
- Impressive growth of tax collection is
impressive - Toledos popularity has fallen to 15
- Some political uncertainty - growing
pressure from regional governments - Fiscal deficit persists
20? Snapshot Venezuela
- Inflation rate 30.7 (annual rate to Nov. 02)
- Interest rate 27.9 (domestic bank deposit
rate) - US dollar value 1,598 Bolivares (as at April
23) - Economy likely to contract 9.3 in 2003
- Price and capital controls in place
- Imbalance in fiscal accounts likely to result
in currency depreciation - perhaps as much as
66 in 2003 - Should be able to service external debt
- Political tension remains high
21? Other important considerations
- Region affected by performance of global
markets - particularly that of US - Potentially favourable impact of Chiles PTAs
with EU and US (the latter is awaiting
ratification) - Keep in mind that very few markets in the
world are performing much better - EU remains
sluggish / Asia is suffering from impact of SARS
/ Middle East remains unsettled - Regions markets have maintained commitment to
free market policies and orthodox economic
measures - Latin America has changed since 1980s for
the better
22? Conclusions
- Regional economic growth is low, but
indications of rebound exist - The appeal of these markets depends on what
you want to achieve - differentiate between
investment / export / import - Volatility exists, but can be managed
- The recommended approach do your homework
visit regularly exercise caution above all make
a long-term commitment - All markets go through cycles - persevere
and be willing to take advice from those with
experience