The Global Transaction Services business at Bank of America
Merrill Lynch has published its annual report on the Latin America
market, entitled “Driving Growth in Latin America.” The report,
which appears in Treasury Management International magazine (TMI),
includes a series of articles summarizing the challenges and
opportunities for companies conducting business in the region.
“Clients around the world increasingly tell us that Latin
America is a crucial part of their strategic growth objectives.
It’s no wonder. Foreign direct investment (FDI) is booming. Latin
America and the Caribbean hit a historic high of $184.92 billion in
2013 – 5 percent more than in 20121,” said Juan Pablo Cuevas, head
of Global Transaction Services for Latin American and the
Caribbean. “In addition, Mexico – which has just implemented a
number of investor friendly reforms – is expected to enjoy a
significant boost to FDI, perhaps overtaking Brazil as the largest
recipient of FDI in the region. Meanwhile, Chile, Peru and Colombia
now have economies that rank as some of the most open among
emerging market countries.”
“Driving Growth in Latin America,” which is available to BofA
Merrill clients and through TMI, features articles on the following
topics:
- The impact of the expanded remit of the
treasury function.
- The growth of non-bank financial
institutions and public sector entities doing business in the
region.
- Best practices of in-house
banking.
- The appeal of Latin America to U.S.
middle-market companies looking to expand internationally.
- The role of escrow in managing risk,
including M&A-related risk.
- What treasury professionals should look
for when investing in money market funds.
- How the integration of trade finance
and foreign exchange can lower a company’s costs and risks.
- A new era for supply chain finance in
Latin America.
“Facilitating the Growing Strategic Role of Treasury” examines
the parallel evolution of the growing importance of the treasury
function with the expansion of companies into international
markets, including Latin America. “Corporate treasury has become a
linchpin in supporting a company’s growth strategy in an
increasingly complex global environment,” states the article, which
goes on to offer guidance on managing risk, enhancing visibility
and control, and knowing when to centralize treasury
operations.
The regional opportunities for non-bank financial institutions
and public sector entities are examined in “Latin America’s Growth
Drives Search for Global Solutions.” The article notes that one
driver of this trend is the increase in consumer spending,
particularly on auto, health and other insurance products. This in
turn has been fueled by the growth in the region’s middle classes,
which it is estimated, will outnumber the region’s poor by
20162.
“In-House Banking: Is the Time Right for You?” looks at how the
changing regulatory landscape and the desire to harness internal
liquidity is spurring companies to restructure their cash
management structures. The article provides an explanation of
in-house banking and identifies the characteristics of
best-in-class models.
In the article, “Latin America Opens Up to the U.S. Middle
Market,” Brazil and Mexico are identified as the primary expansion
targets for many U.S. companies given their size. However, as noted
in the article, the two countries have different characteristics.
Brazil is a complex and challenging country in which to operate
while Mexico is generally seen as the easiest. The article further
discusses that Chile, Colombia and Peru are often secondary target
markets once a company is established in Mexico and Brazil.
“Mitigating Risk in Latin America” examines the crucial role of
escrow services as a risk management tool for multinationals as
they increase their business in Latin America. Escrow services can
be effective tools to manage M&A-related risk, as well as
transaction, regulatory and counterparty risk.
Money market funds historically have been among the most liquid
and stable investments available. Despite this, treasury
professionals need to carefully vet funds’ investment risk to
ensure a fund manager’s risk appetite aligns with their risk
tolerance. “Dissecting Risk in Money Market Funds” details how to
assess and select approach that selection.
In the article, “FX and Trade Finance Convergence Delivers
Benefits,” the author explains how integrating trade finance and
foreign exchange can lead to lower costs and reduced risks. For
example, purchasing goods in local currency can allow companies to
negotiate more competitive local pricing and avoid overpaying for
their imports.
“Supply Chain Finance in Latin America: A New Era” discusses the
current environment for supply chain finance in the region, where
banks have successfully adapted their products and support to
reflect the specific needs of buyers and suppliers in Latin
America.
“Our goal in writing this report was to showcase our advisory
expertise across treasury and transaction services, and to
demonstrate our commitment to supporting companies doing business
in Latin America,” said Cuevas. “We hope that clients will benefit
from the intelligence that we’ve shared, and as a result, will
continue to invest in the region.”
1 Foreign Direct Investment in Latin America and the Caribbean
2013, Economic Commission for Latin America (United Nations), May
2014
2 Social Gains in the Balance, World Bank, February 2014
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