Latin America offers great opportunities to Asian banks and businesses, a senior Japanese banker has said on the eve of the annual Inter-American Development Bank meeting, which will take place in Busan, South Korea, in March.
Toshifumi Murata, BTMU
Toshifumi Murata, regional head of Latin America for Bank of Tokyo-Mitsubishi UFJ (BTMU), says that since the bank recapitalized its Brazilian and Mexican subsidiaries (by $400 million and $200 million respectively) in 2011 and its Chilean operation by $70 million in 2012, regional revenue growth has been strong.
Despite the region slowing in the past couple of years, the bank’s compound annual growth rate has been 24%. Murata predicts this will slow in the next few years to between 10% and 11% as the business matures (and the base grows) and the region faces headwinds.
BTMU says that 30% of its regional revenues come from activity related to Japanese companies, with the rest sourced from local companies. One area of growth has been syndicated loans – and with capital markets financing becoming more volatile this could grow quicker. Murata says European banks withdrew from the region’s loan markets following the 2008 crisis – the banks pulled back capital to strengthen home balance sheets and regulatory changes increased the cost of loans.
Since then, Asian-based banks have increased their presence in the region. Deals such as BTMU’s syndicated loan for Mexico’s Sigma Alimentos, for which the bank was sole lead in raising a $1 billion senior unsecured facility priced at 125 basis points over Libor, have continued to raise the bank’s profile in LatAm loan markets. The Japanese banks enjoy high levels of liquidity and can be very competitive on pricing.
BTMU is also focusing on building its regional DCM franchise, having been involved in a 4.75%, $500 million deal for triple-B Chilean pulp maker, CMPC recently. BTMU, JPMorgan and Santander raised $1.75 billion in orders last September, enabling the issuer to lower the price by 10bp from initial price thoughts to price at 225bp over Treasuries.
Murata says: “Latin America has a very important role in the global economy,” he says. “I think people focus on Asia, China and other regions [at the expense of Latin America], but four years ago we built a regional strategy that recognizes its potential size. The emerging markets are the fastest growing part of the global economy, and if you look at the demography of the region these are still young countries.
“Using a 20 to 30 year perspective, Latin America has big potential to grow.”