Potential market and the role of banking in the economic integration of Latin America Mar 2008
Some of the issues Potential market What are the difficulties to expand credit operations?
The size of the region GDP of a sample of countries US$ billion 2000 2006 GDP 1,885 2,725 Brazil/Sample 34% 39% Sample: Argentina, Bolivia, Brazil, Chile, Colombia, Uruguay, Peru, Equator, Venezuela, Mexico
International Trade Trade in the Region US$ Billion 2000 2006 Exports 293 558 Imports 296 471 Total Trade (% of GDP) 31% 38%
Regional Trade Intra Regional Trade (US$ billion) Mercosul Andean 1999 2005 1999 2005 Exports 74 163 24 51 Intra-regional 15 21 2 4 Extra-regional 59 142 22 47 Imports 83 113 23 47 Intra-regional 16 22 2 5 Extra-regional 67 91 21 42 Share (%) Exports 20% 13% 6% 8% Intra-regional 80% 87% 94% 92% Extra-regional Imports Intra-regional 19% 19% 9% 11% Extra-regional 81% 81% 91% 89% Source: WTO
Foreign Investment Stock of foreign capital in Brazil Stock of Brazilian investments by country (US$ Million) (US$ Million) Country 2000 2006 Country 2000 2006 Argentina 758 1,297 Argentina 1,625 3,385 Bolivia 4 7 Bolivia 36 56 Chile 228 555 Chile 158 275 Colombia 15 252 Colombia 130 30 Equator 1 9 Equator 71 8 Mexico 132 2,767 Mexico 52 151 Peru 1 3 Peru 40 326 Uruguay 2,107 3,239 Uruguay 3,121 1,981 Venezuela 19 48 Venezuela 27 135 Total 3,264 8,177 Total 5,260 6,347 % Total 3% 4% % Total 12% 7% Fonte: BCB
Population growth with purchasing power Above poverty line Country Population (thousands (thousands of Share of population of Inhabitants inhabitants) (%) 1999 2005 1999 2005 1999 2005 Change Argentina 36,784 38,592 28,066 28,558 76% 74% -2% Bolivia 7,482 9,427 2,948 3,403 39% 36% -3% Brazil 162,019 187,597 101,262 119,499 63% 64% 1% Chile 14,395 15,398 11,487 12,519 80% 81% 2% Colombia 38,542 46,039 17,382 24,493 45% 53% 8% Equator 11,397 13,215 4,160 6,832 37% 52% 15% Mexico 91,145 106,147 48,398 68,465 53% 65% 11% Peru 23,837 27,947 10,774 13,666 45% 49% 4% Uruguay 3,218 3,455 2,916 2,805 91% 81% -9% Venezuela 22,043 26,577 11,154 16,717 51% 63% 12% Total 410,862 474,394 238,547 296,957 58% 63% 5% Source: Cepal
Brazilian financial institutions investing abroad Brazilian investment abroad: financial sector (US$ million) 2001 2002 2003 2004 2005 2006 Total 42584 43397 44769 54027 65418 89423 Financial sector 13171 15083 13856 15137 17234 19876 Share (%) 31% 35% 31% 28% 26% 22% Source: BCB
% GDP 40 Crowding out out in in Brazil Brazil and and other still a problem other countries countries is % GDP 65 38 60 36 55 34 50 32 30 28 45 40 26 35 24 30 22 25 20 20 Sep-95 Jan-96 May-96 Sep-96 Jan-97 May-97 Sep-97 Jan-98 May-98 Sep-98 Jan-99 May-99 Sep-99 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 Source: Banco Central do Brasil Total Credit Net Public Debt
120 100 80 60 40 20 0 Source: Moody s 66 Gross Public Public Debt (% GDP) Debt - 2006 39 42 % Chile México Paraguai Venezuela Perú Colômbia Brasil Uruguai Bolívia Argentina Média AL Rep. Techca África do Sul China Rússia Tailândia Coréia Malásia Tunísia Indonésia Turquia Índia Outros ME
36 Cost of credit still an obstacle, the case of Brazil 34 32 30 28 26 24 22 20 34 32 30 28 26 24 22 % PIB jan/01 mar/01 mai/01 jul/01 set/01 nov/01 jan/02 mar/02 mai/02 jul/02 set/02 nov/02 jan/03 mar/03 mai/03 jul/03 set/03 nov/03 jan/04 mar/04 mai/04 jul/04 set/04 nov/04 jan/05 mar/05 mai/05 jul/05 set/05 nov/05 jan/06 mar/06 mai/06 jul/06 set/06 nov/06 jan/07 mar/07 mai/07 jul/07 set/07 nov/07 jan/08 % Source: Banco Central do Brasil (2008) Crédito Total Spread médio livre
Real estate financing (% of GDP) Chile México Brasil Média AL Holanda Reino Unido EUA Alemãnha Malásia França Tailândia Hungria Tunísia Média Outros 2 5 6 7 6 12 21 19 16 36 53 51 62 88 Better Collateral Courts allowed the continuity of principal installments when interest is under dispute % 0 20 40 60 80 100 Crédito ao consumidor 2005 (% do PIB) MÉXICO 3.82 CHILE 7.95 BRASIL (jan-2008) 11.92 EUA 17.56 REINO UNIDO 63.81 Fonte: Hassler (2003) / Banco Central do Brasil / Banco Central do Chile / FED / Banco Central do México / Banco Central da Inglaterra
Spread ex-ante (Interest revenue less interest spending over remunerated assets) 25 20 15 % 10 5 8,9 8 5 0 Colombia Chile México Equador Bolívia Brasil Peru Paraguai Venezuela Média América Latina Média outros ME Fonte: Gelos (2006)
Some conclusions The region is growing and becoming more integrated, thus the potential is large Some of the traditional markets for banks, such as real estate financing is still beginning Over-regulation: high required reserves; ear marked credit; easy taxing opportunities for the government are among the major obstacles to credit expansion.
Further information: Tomás Málaga tomas.malaga@itau.com.br