LatinFinance - November/December 2013 - 32

more of the country's private sector lenders
can get involved.
So far, most of the lending to latin
america has been through governmentbacked institutions such as Kexim, KDB
and Korea trade insurance corporation
(K-Sure).
at the end of last year, loans to latin
america accounted for 9.3% of Kexim's
84.1 trillion won ($78.9 billion) in loans
outstanding. this was up from 6.8% of an
80.4 trillion won outstanding volume in
2009.
the Korean government, which joined
the inter-american Development Bank
(iDB) in 2005, is encouraging the country's
commercial banks to get involved in major
global projects, under the leadership of the
export credit agencies.
"Some of these deals can be done better
if the banks in Korea are more supportive
and provide a more solid funding
structure," lawrence lam, director at
Samcorp, a Peruvian conglomerate with an
asia-focused trading business, said at the
LatinFinance latin america Korea investors
forum in Seoul in September.
oil and gas and mining have been among
the most important areas for investment in
latin america to date. now, manufacturing
will provide more opportunities for Korean
lenders - and open new channels for
investment, lam says.
Part of the success will lie in partnering
with latin american companies, something
which he says the chinese have not
exploited fully in their bids for projects.
mexico, chile, colombia and Peru offer
the clearest opportunities in the short to
medium-term, lam says.
Korea became an observer in the Pacific
alliance this year. Korean engineering,
procurement and construction (ePc)
providers have been involved in mexico's
power sector. the energy reforms now
being discussed should open additional
opportunities.
EPC connection
Korean companies have been expanding
their activity in latin america, from ePc
and construction to investment, operations
and maintenance, says Yong Hwan Kim,
chairman of Kexim.
Hyundai motors has invested in
manufacturing in Brazil, as has food and
biotech holding company cJ cheil Jedang,
which set up a lysine plant in 2005.
companies are also diversifying
by industry, from traditionally strong

32 l atinfina nce.com - November/December 2013

petrochemical and power sectors, to it
systems.
Korean agencies are keen on the
region's infrastructure project offerings.
Yet many say their investments are limited
by the slow pace of progress.
"there are a limited number of projects
that we can look at for ePc. that is the
challenge with latin america," said moo
Hoon Kim, who runs Samsung's power
business. His firm's priorities are mexico,
chile and Brazil, he says - but delays in
many projects advancing makes planning
difficult.
Samsung has worked on a project to
upgrade mexico's Salamanca refinery,
which will reconfigure the facility to
increase diesel and gasoline production
while reducing fuel oil output. Kim says
the company is also interested in projects
in chile and Venezuela, as well as Bolivia
for fertilizer.
Government agencies run up against
limits, says John Kim, head of the
international finance team at Korean
construction conglomerate SK e&c.
Particularly in less-developed countries,
multilaterals and export credit providers
have per-country lending ceilings.

Lawrence Lam, Samcorp

"The manufacTuring
secTor is going To
be The nexT big move
in The LaTin america
markeT, parTicuLarLy in braziL, mainLy
because of size.
They wiLL be abLe
To suppLy producTs
To oTher LaTin
american counTries"

"the country credit limit is directly
linked to the GDP of a country, says WooYoung Jiang, Kexim's director of power
industry finance. But there is flexibility,
he says: "We can raise the limit if project
is worthy. the most important factor is
viability and soundness."
Kexim typically passes construction
risk to other parties, says Jiang. ideally,
that would happen through a completion
guarantee from the sponsor, although that
can be difficult to secure.
china's interest in latin america's
natural resources has been wellestablished. But when it comes to
infrastructure, Korean firms - coming from
a private sector in a democratic society -
may have an advantage over chinese state
owned enterprises, Samcorp's lam says.
"the manufacturing sector is going to
be the next big move in the latin america
market, particularly in Brazil, mainly
because of size," says lam. "they will be
able to supply products to other latin
american countries."
Koreans have just as much to offer in
terms of technology and expertise, and
they are more willing to latch on to local
partners in latin america, necessary to
navigate labor tax and other complications,
says lam. a reluctance to do this means
chinese companies have won fewer bids
than they'd like, he says.
More ahead
Korea signed a free trade agreement
(fta) with colombia in february. Under
the agreement, both countries agreed to
abolish tariffs on over 96% of the other
country's products within 10 years.
Korea hopes to increase exports of
vehicles and vehicle parts, textiles, plastics,
and steel, while colombia expects to
export more agricultural products such as
coffee and bananas, and natural resources
including crude oil. the colombia deal
follows ftas with chile and Peru.
the focus now turns to a revival of
talks with mexico, which stalled in 2008.
enrique Peña nieto, mexico's president met
Park Geun-hye, his Korean counterpart,
at the asia-Pacific economic cooperation
(aPec) summit in october. the results of
that were not immediately clear.
"the Peña nieto government is
addressing structural reforms," says
Kexim's Kim. "ongoing reforms will lay
the foundation for development to which
Korean companies and development banks
can contribute." LF
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