LatinFinance - January/February 2018 - 34

FINTECH
TRADE
FINANCE

Cross-border trade is set to get faster and cheaper as financiers develop
distributed ledger projects to streamline documentation and facilitate
credit. Latin America could be a major winner. By Jason Mitchell

The great disruption
atin America and the Caribbean import $818 trillion of goods and services
from the rest of the world every year and
export a similar amount, according to the
World Bank. Most of that trade is meticulously documented on paper and based on
antiquated agreements and protocols that
are more than a century old.
Now, banks are teaming up with technology companies to develop new tools to
speed up the process. The pilot projects
have the potential to transform trade -
and the way it is tracked and financed -
throughout Latin America and the world.
The key to much of this potential revolution lies in blockchains, or distributed
ledger technology (DLT), which gathers
databases that can be shared between at
least two parties.
Bitcoin pioneered an early form of DLT,
the public blockchain, which serves as a
trading platform open to everyone. But
increasingly innovators are recognizing that
the technology can be used in many other
spheres, including trade, once distributed
ledgers are made "private" or "private permissioned," meaning only invited participants can access information.
Experts are betting that DLT will disrupt
fields from educational and medical records to contracts and financial accounts.
But trade may well be one of the first areas
to adopt widespread distributed ledger
technology.
"Trade finance is very siloed, with mul-

34 L ATINFINA NCE.COM - January/February 2018

Source: Istockphotos

L

DIGITAL REVOLUTION: Blockchain-style systems are set to speed up export paperwork and
make trade financing easier

tiple pools of collateral and information
that do not communicate with each other,"
says Carlos Arena, a business development
director at R3, a company that is working
on a large-scale DLT platform for banks. "It
will be one of the first pain points to be addressed by this technology, with end-to-end
IAN CHAN, DELOITTE

"TRADE FINANCE IS
RIPE FOR DISRUPTION.
IT IS TOO PAPERINTENSIVE AND A LOT
OF OVERHEAD IS
INVOLVED"

applications that finally provide a source of
truth throughout the entire process."
With blockchains, Arena says, Latin
American importers and exporters can
leapfrog many years of underinvestment
and adopt technology that transform business.
Ariel Arrieta, founding partner at NXTP
Labs, a Buenos Aires-based early-stage
fund for tech companies in Latin America,
agrees. "This technology will revolutionize
global trade," he says, adding that DLT is a
disruptive force that will upend the traditional roles of banks and other intermediaries.
"It will make it a lot quicker and smoother for importers and exporters around the
world to trade with one another," Arrieta
says.
http://www.LATINFINANCE.COM
Table of Contents for the Digital Edition of LatinFinance - January/February 2018
