Bank of America Merrill Lynch Publishes Report on Latin America Market

New York - 27 August 2013

  • Strategic Treasury for Latin America 2013 Authored by Global Transaction Services
  • Identifies Opportunities, Challenges and Variations Companies May Encounter When Doing Business in the Region
  • Chile Characterized as Attractive Business Location in Light of Its Investment Grade Credit Rating and Stable Democratic Government

The Global Transaction Services business at Bank of America Merrill Lynch has published the report, Strategic Treasury for Latin America 2013, which currently appears in Treasury Management International (TMI) magazine. The report, which is produced annually, identifies the opportunities, challenges and market variations that companies may encounter when doing business in the region.

“To outside companies looking to expand internationally, Latin America is a land of opportunity,” states Juan Pablo Cuevas, head of Global Transaction Services for Latin American and the Caribbean, in the introduction of the report. Cuevas explains that despite recent events in Brazil, “by and large, the political instability that was once inherent in the region has given way to longer-term governments and longer-term planning as the region’s economies continue to grow.”

Strategic Treasury for Latin America 2013, which is available to BofA Merrill clients and through TMI, features articles on wide-ranging treasury and transaction services issues, including:

• The most attractive opportunities for trade and investment in Latin America.
• The most suitable countries for establishing shared service centers.
• Implications of the Pacific Alliance and the Integrated Latin America Market (MILA).
• How treasurers can more effectively leverage their technology, including mobile.
• The advantage for treasury departments to work with a banking provider that can relay real-time information on their cash and securities exposures.
• How treasurers can optimize liquidity management in the region.
• Best practices on the part of Latin America companies to allocate at least a portion of their liquidity to USD-denominated products.
• How the conditions in Latin America are ripe for more widespread use of commercial cards.
• How multinationals, eager to take advantage of the opportunities in Brazil and Mexico, are seeking to increase investment and activity in both countries

In the article, “Navigating Latin America’s Liquidity Landscape,” the bank provides country-by-country profiles on liquidity conditions. Mexico is noted for being more liberal where liquidity management is concerned, while Chile is singled out as “an attractive business location for international corporations in light of its investment grade credit rating and stable democratic government.”

The attractiveness of Latin America as a location for shared service centers is explored in “Bienvenidos a Latin America,” where the following characteristics are identified:

• Economic and political stability, which are a key to cost-effective investment, although there are some exceptions within the region.
• The region’s proximity to and cultural affinity with the U.S., and that its time zones mirror that of the U.S., avoiding the need to establish overnight shifts.
• Costs for real estate, wages and infrastructure in most countries are significantly lower than in the U.S. and in some cases lower than in parts of Eastern Europe and Asia.

The article, “Entering Latin America: Knowledge Is Power,” discusses prerequisites for companies expanding into the region. They include the need to:

• Consult with legal, tax, regulatory and accounting advisors to discuss requirements for setting up operations in the region.
• Consult with banks to better understand what can and cannot be done in a particular market in order to determine if the company’s goals are achievable or not.
• Establish visibility of accounts to achieve a true understanding of the company’s cash position.
• Understand regulatory obstacles. For example, in Chile and Colombia, foreign exchange restrictions prevent companies from making foreign currency payments out of those countries.

“Latin America Rising for Trade and Investment” compares the relative investment opportunities of the region’s economies and discusses drivers of growth. Notable data points include:

• In 2012, Latin America showed the highest growth in FDI amongst any region. And within the region, Chile saw the largest increase.1
• While investments in Brazil and Mexico tend to be broader based, investment in other countries tends to be focused with Peru concentrated in communications and mining (more than 50 percent of FDI), Colombia in oil and mining (more than 74 percent) and record investment in Chile in mining and services (75 percent)
• The economies of Chile, Colombia and Peru grew at rates of 5.6 percent, 4 percent and 6.3 percent respectively in 2012.

“Bank of America Merrill Lynch is committed to supporting our clients’ continued development within Latin America,” said Cuevas. “We hope this report goes some way to helping companies understand the nature of the Latin America market so that they can take advantage of the region’s increasingly attractive opportunities,” he concluded.

[1] United Nations Conference on Trade and Development (UNCTAD). Page 10 of “Strategic Treasury for Latin America”

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