Latin Finance - March 2008 - 2

Front Notes Bring on the Chinese hinese firms are heard well advanced with schemes to take a larger slice of Latin America, the origin of much of the natural resource fuel feeding the Asian tiger’s sustained expansion. Building on existing joint ventures, China should become a more dominant outright acquirer, particularly in energy and commodities. This will likely be followed by M&A in the financial sector as China tightens its grip on the region. LatAm should not fear the invasion. The competition is positive, not just as an added source of investment. The benefits of trade work both ways, particularly as LatAm emerges as a significant player in global business, propelled by a rising number of free trade agreements. Asia is a low cost producer of manufactured items like electronics, textiles, and clothing – for which there is a growing LatAm market. Diminished vulnerabilities owing to floating currencies, reserve accumulation, trade/current account surpluses, and reduced fiscal deficits in the bigger countries make the region a much more attractive trading partner for Asia. Standard Chartered cites WTO data showing the value of LatAm exports hitting $355 billion in 2005, rising 25% year-on-year and growing at an annual average rate of 13% for 2000–2005. This is mostly agricultural and fuel/mining products, with a third destined for the US. The share of LatAm’s exports to Asia rose to 13.4% in 2005 from 9.7% in 2000, and exports to China in particular grew at an annual average pace of 20% for 2000-2005, says Standard. The trend continues. In 2006, China was one of the top five export destinations by value for Argentina, Brazil, Chile, and Peru, buying almost $20 billion from those countries. But surprisingly, imports from China to LatAm are even more significant, says Standard Chartered. In 2006, China was one of the top five trading partners for those four LatAm nations, plus Mexico and Colombia, who collectively shipped in a total of $37.2 billion. Recent Chinese government data show trade with LatAm exceeding $100 billion in 2007, more than the target the Asian nation had penciled in for 2010. And it is not all about China. South Korea is a major trade partner, especially for Chile and Mexico. This is quite a leap from just a few years back, when trade would have been dominated firstly by neighboring countries in the region, then by the US and Europe. In exchange for its soybeans, copper and crude – all of which look set to hold firm for the foreseeable future – LatAm has a lot to gain from stronger ties to Asia. As the US falters, it makes sense for the region to bolster links to its fellow fast-expanding emerging markets to the east, not just China. Diversification and vigorous trade work to the benefit of the entire region. EDITOR James Crombie ASSISTANT EDITOR Dan Shirai REPORTER Ben Miller REPORTER Julio Urdaneta CONTRIBUTORS Greg Brosnan, Lucien Chauvin, Dan Horch, Jason Mitchell, Renzo Pipoli, John Rumsey, Luis Waldmann ART DIRECTOR Rosa Matamoros-Sense COVER ILLUSTRATION Barry Falls ASSOCIATE PUBLISHER James Norton SENIOR MANAGER, BRAZIL, CANADA AND COLOMBIA Teresa Aguilar SENIOR MANAGER, MEXICO & CENTRAL AMERICA Danielle Assis MANAGER, CARIBBEAN, PERU, BOLIVIA, ECUADOR Arielle Schrader EUROPEAN REPRESENTATIVE Robert Logan T +44 (208) 579-4836 CARIBBEAN & VENEZUELA REPRESENTATIVE Matthew Perks T +1 (718) 260-8970 ADVERTISING & PRODUCTION ASSISTANT Suhey Saldarriaga SENIOR EVENTS MANAGER Omar Suarez EDITORIAL DIRECTOR, CONFERENCES & SPECIAL PROJECTS Michael Brosgart EVENTS MANAGER Mariana Novaes PROGRAMMER-CONFERENCES & SPECIAL PROJECTS Marlene Alvarez MARKETING MANAGER Kathy Andrew CIRCULATION MANAGER Patricia Arcic OFFICE MANAGER Teresa Romero ASSISTANT TO THE CEO Vicky Maqueira NETWORK ADMINISTRATOR Lukasz Przybyl LATINFINANCE BOARD OF DIRECTORS Stuart Allen, Christopher Brown, Colin Jones, James Crombie, Giuliana Moreyra CHIEF EXECUTIVE OFFICER & PUBLISHER Stuart Allen CHIEF OPERATING OFFICER Giuliana Moreyra C Poor Investment Bankers Spare a thought for those poor LatAm investment bankers whose compensation was sacrificed to the beast of US subprime. Some New York-based senior staff may have earned as little as $1 million for their significant toils in 2007, a record year for many LatAm desks. This may seem like a lot, but consider that at least half may be in deferred stock that vests over a period too long for many young financiers to think about. If they jump ship, bankers will need to secure a hefty signing bonus. The greater risk is redundancy and loss of that portion of the check. About 50% of the rest goes to the government, leaving $250,000 which barely buys the Patek Philippe, Bentley and night out to celebrate. Forget about the Ferrari or yacht to escape the rising cost of living like a banker in Manhattan, including housekeeper, babysitter, gym membership and therapy. Having to subsidize US and European counterparts for fixed income follies – in many cases directly attributable to high level strategic errors and careless risk management – incensed senior LatAm executives. With the exception of certain business lines in Brazil, where revenue shot up exponentially, few sidestepped the swipe of US structured losses. This makes a move to domestic markets – where all the action is heading – look like an increasingly attractive option. Banks are migrating regional desks to São Paulo and Mexico City to get closer to the flow and headhunters predict increasing trade in that direction. It may be time now for those with long term banking aspirations to escape from New York and join the boys from Brazil. Telephone: (305) 448-6593 Fax: (305) 448-0718 E-mail: editorial@latinfinance.com www.latinfinance.com Subscriptions hotline: U.S. (800) 437-9997 (212) 224-3570 U.K. 44 (0) 870 906-2600 E-mail address: subscriptions@latinfinance.com Subscriptions: one year US $349 ($20 additional for postage outside the US). Send subscription orders to: LatinFinance, 2600 Douglas Road, Suite 410, Coral Gables, FL 33134 USA T 305-448-6593, F 305-448-0718. Copyright© 2006 Latin American Financial Publications, Inc. is owned by Ell Holdings, Inc. All rights reserved. Reproduction in whole or in part of any text, photograph, or illustration without written permission from the publisher is strictly prohibited. Title is protected through a trademark registration with the US Patent Office. Indexed in Information Access Company. 2 LATINFINANCE March 2008

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Latin Finance - March 2008

Table of Contents for the Digital Edition of Latin Finance - March 2008