Foreign Bankers Latin American Governments Cautious As Us Market Declines
Written by Shearon Roberts on October 9, 2008
By Shearon Roberts
Foreign bankers in Miami are treading cautiously on US investment given the past week’s declines on Wall Street.
Latin American governments are also bracing for minor losses from the collapse of several financial firms like Lehman Brothers.
"All countries are going to be hit by what we’re seeing now. It’s a world condition," said Jose Dario Uribe, governor of Banco de la Republica de Colombia, the country’s central bank.
Mr. Uribe spoke about the effects of the US economic crisis Tuesday while addressing foreign bankers about Colombia’s financial stability. The Florida International Bankers Association hosted the event at The Westin Colonnade in Coral Gables.
"We have an investment ratio that went from 12% of GDP to 28%, so Colombia’s investments have gone along way so far," Mr. Uribe said. "So we will be hit; everybody is going to take a hit."
Like most cautious Latin American governments, though, that hit will be small, he said.
The country lost a mere $25 million, or 55 billion Colombian pesos, of its government pension fund that it invested with Lehman Brothers, Mr. Uribe said. That is only one-tenth of the country’s pension fund savings.
In total, the country has only lost 0.012% of its total international reserves from losses in the stock market this past week.
"We don’t like to lose any money; we hope to recoup as much money as possible," Mr. Uribe said.
At the start of this week, central banks across the globe pushed capital into their local national banks to stop a spreading downward spiral from failed US financial institutions.
Mr. Uribe said that since Colombia had suffered a major recession in the late 1990s, its banks consolidated from a high of about 35 to about 15.
"We already experienced what the world is going through right now," he said. "That was very painful for us, but it created a financial system that is stronger and well capitalized. That is part of our strength now."
There is some credit tightening for lending in Latin America, he said.
International lines of credit are still available at banks in Colombia and throughout Latin America, Mr. Uribe said. However, banks are asking more questions of borrowers.
In Miami, foreign banks had taken bold steps in the last couple of years in buying US banks or their subsidiaries. Spanish banks Banco de Sabadell bought TransAtlantic Bank in 2006 and Banco Popular bought TotalBank in July 2007.
The banks purchased were Miami-based.
Also in 2007, Spain’s largest commercial bank, Banco Santander Central Hispano, bought the Latin America customer holdings for Bank of America and Bank of America Investment Services Inc.
One Latin American bank, Brazil’s Banco Itau Europa International, bought Netherlands-based bank ABN Amro in 2007 and the Edge Act banks of Bank Boston from Bank of America last year.
Foreign bankers say those acquisitions were still cautious deals for international banks moving into the Miami financial scene. Investing in Latin America is their area of expertise, they said, and they are more willing to bet on the stability of their own region.
"In this current crisis, everybody is going to wait and see how things go," said Camilo Patino, president and CEO of Bancafe International, the Miami operation for Bancafe, a Colombian bank.
"Foreign banks are always being approached for foreign investments for the US or Latin America," Mr. Patino said. "Maintaining independence here will be better for their stability at this time."