Doing business in Latin America

Transcription

1 Doing business in Latin America

2 Understanding Latin America Brazil Mexico Southern Cone Andean State 2

3 Multiple countries Multiple currencies Multiple considerations The Latin America payments landscape is diverse and requires knowledge and planning! 3

4 Banking in Latin America Total population: 572,039,894 Total GDP: $5,181BN MXN USD CRC Record levels of Foreign Direct Investment (FDI) in 2013 $184.92bn 5% rise from prior year Pacific Alliance, Mercado Integrado Latinoamericano (MILA) BRL Boletos, Bolaros COP CLP MXN BRL USD CLP PEN ARS COP CRC PEN ARS Population GDP Portuguese, Spanish and English Reaching the unbanked Representative scale Source: IMF, World Economic Outlook Database 4

5 Why Latin America? Global economy is increasingly driven by growth in emerging market countries, such as Brazil and Mexico Latin America continues its economic development with regional growth driven by the stronger economies of Peru, Colombia, Ecuador, Chile, Mexico and Brazil Despite economic headwinds, Latin America continues to offer tremendous opportunities for firms doing business in the region Foreign direct investment in the region continues to increase Initiatives, such as the Pacific Alliance and the Integrated Latin America market (MILA), are helping to integrate the various regional markets 5

6 Preparation is Key MEXICO COLOMBIA PERU VENEZUELA BRAZIL Latin America is a widely diverse region - Large number of countries - Economic diversity - Differing regulatory environments Differing political environments Challenges range from the difficulties of dealing with diverse regulatory and tax jurisdictions to simple local language communication barriers CHILE ARGENTINA Some may view Latin America as a single, distinct region that is until they encounter the varying legal frameworks and regulatory regimes in the individual markets Companies will need to examine operating and treasury models to adapt to challenges encountered with market practices Preparation is key! 6

7 Managing risk and regulation Risk radar Freedom to move LCY and FCY liquidity Cultural risk Volatile investment incentives Uneven recovery FX volatility Political instability? Social instability? Central bank(s) intervention? Availability to centralize some FCY liquidity CHILE URUGUAY PERU PANAMA Liquidity focused to in-country solutions BRAZIL N.AMERICA MEXICO Liquidity flows Free flowing VENEZUELA COLOMBIA ARGENTINA Challenged Highly restricted Regulatory environment Minimally restricted 7

8 Some important liquidity considerations Sweeping and cash pooling are unrestricted within a single entity, between resident entities and between resident and nonresident entities MEXICO Financial transaction tax affecting zerobalancing activity if accounts do not belong to same legal entity Cross-border liquidity structures involving resident and non-resident entities are possible but tax planning is necessary Zero-balancing onshore is possible in the same currency No specific regulations nor restrictions forbidding notional pooling, there are some tax considerations regarding joint debtor status and thin capitalization rules COLOMBIA PERU CHILE Cross-border pooling is not permitted Zero- balancing between companies within the same group is permitted, although the range of suitable investment instruments is not extensive No overnight deposit market but interest-bearing savings accounts and term deposit certificates are available, along with bank commercial paper BRAZIL ARGENTINA Notional pooling is not allowed Zero-balancing onshore is permitted within a single entity Sweeping or physical cash concentration within the same local entity is allowed in Brazil (neither is typically permitted among different resident entities or among resident and nonresident entities) Zero-balancing is commonly used among subsidiaries of the same resident entities Sweeping transactions may be treated as intercompany loans, while also being liable to tax charges 8

9 Master Card TBD 9

10 A brave new world Real GDP growth (% yoy) (%) Developed markets Emerging markets MEXICO COLOMBIA VENEZUELA PERU BRAZIL CHILE ARGENTINA Source: Bank of America Merrill Lynch