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John Pickhaver and Tim Joyce Macquarie has entrusted these two unassuming but highly competent bankers to run its most important investment banking team, Macquarie Capital Australia. View this post on Instagram. License article. Investment banking Unable to follow, try again. Email Sarah at sarah. He has 10 years' experience as a business journalist and previously worked at professional services firm PwC, auditing and advising financial services companies. Connect with Anthony on Twitter.
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Latin America investment banking – the brittle relationship
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Why the first all-electric Porsche is not an SUV. If local markets evolve quickly in Brazil, that could also complicate the revenue targets being set for Latin American banking teams. Brazil is clearly expected to be the engine of growth for international investment banks in the coming years. Equities bankers are Brazil-focused. Talking in February, one senior ECM banker on Faria Lima says that he expects 12 deals to have been mandated by the end of February or beginning of March. The banker seems excited and fearful of the outcome of these mandates in equal measure: he will either have succeeded in getting an important foothold in the new wave of ECM deals or already be behind his competitors and face awkward questions from his bosses in New York.
He is excited about the potential pipeline from Brazil — not just in the short term but throughout this year, next year and potentially longer. Our pipeline is growing by the day. Ricardo Lacerda, founder and chief executive of BR Partners, is a little more sceptical about the scale of the privatization programme in the next couple of years. First, he says, of the four most sellable assets — Petrobras, Banco do Brasil, Caixa Economica and Eletrobras — the government has said it is not going to sell three of them. He thinks there will be big asset sales, with airports and energy assets the most likely to sell.
Martin Marron, head of Latin America for JPMorgan, points out that the figure was more in line with the annual rate for and , and that was the outlier — the fall in the last couple of years is more a return to the norm than a sign of a Chinese lack of interest in the region. We think the underlying fundamentals that drive this activity will be strong in the region.
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Brazil typifies the infrastructure and project finance requirement that is facing the region. The needs are spectacular, not just in the areas of rail, roads and airports to boost logistics and productivity but also energy and water and sewage management. Lacerda thinks tax breaks will help bring in foreign capital to fund local-currency denominated long-term financing. The ideal is to develop onshore or offshore pockets of local-currency debt; once that liquidity has built up, to try to add in the credit risk of project finance.
Consistent issuance of local-currency bonds would be an encouraging sign. There are about 20 or so real money guys who invest in these deals — not Can we eventually combine these liquidity pools in an issuance with both local and international investors? Argentina is, because of its lack of domestic capital markets, the negative image of the rest of the region. For example, whereas Colombia offered a small element of dollar-denominated structures for its fourth-generation toll roads, the sticking point generally for Latin American countries other than Argentina is local currency financing.
Had it not been for the August collapse in the peso, which created issues for the chosen consortium of the six projects, it is likely that the international markets would have assumed the long-term financing of these particular projects. For Argentina to grow it is going to need to tap the international markets. Perhaps this is why the internationals are so bullish on Argentina. If president Mauricio Macri or someone else from the Cambiemos party is re-elected, the country will continue to be a frequent issuer of debt in the international capital markets. With the re-privatization of the national pension fund organization Asnes off the table for a mix of mainly political reasons, Marcos Ayerra, chairman of CNV is pursuing a wide mix of policies aimed at improving the onshore liquidity of the capital markets.
He points to tax reforms — the first attempt by the government to both increase revenues and repatriate capital. The reform was a success in the former aim, less so on the latter, but Ayerra acknowledges that it will take time to turn the Argentine financial system away from its purely transactional nature and into one that appeals to both local and international investors. Beyond these high-level changes, Ayerra has also been sponsoring the development of digital syndications of small and medium-sized enterprise loans to try to jump-start investment and growth.
He concedes that the impact of these reforms has been muted, given the recent crisis, but if and when the economy rebounds, the hope is that the regulatory friction to growth should have been substantially reduced. The Andeans are doing well. And now Venezuela appears to be back in play. The outcome is far from certain, but there may yet still be a path back for the oil-rich country to financial orthodoxy. Bankers are happy to discuss the individual country scenarios, but some seem reluctant to draw their optimistic outlooks into a single narrative for the region.
And what would this mean for the region and its relative attractiveness in the emerging market world? If this happens, it could really drive Latin American outperformance in the EM world. Over the decades, many international investment banks have been inconsistent in their Latin American coverage strategies. So perhaps it is unfair that Goldman Sachs has become synonymous with the phenomenon of banks establishing offices in growing markets only to beat a path out the door when the cycle inevitably turns.
Gonzalo Garcia was given the mantle of co-managing the region two years ago. Garcia drew three main conclusions : first, he was impressed with the team. The bank sent Matias Rotella from New York to open that office, while Garcia also did selective strengthening of other offices and product areas in the region. Part of his audit was to meet with clients of the firm.
We miss you! We have now moved on to having more fluid conversations and they now know that we are going to deliver. And as a bank, our team knows that they are going to be measured on the relationships they build with our clients in the region. He immediately volunteers this observation.
The only thing that has remained the same in the region, he says, is the relative size of each country. During the last 50 years many of the countries have experimented with military dictatorships and populist economics. Now free-market policies are embedded in many and becoming adopted in the stragglers. But while Marron might be optimistic about this alignment, he is still realistic about the work that needs to be done to get the most vulnerable economies into sustainable recovery.
The prospect of a left-wing leader in Brazil led many investors to conclude that Brazil would follow Argentina into default. The sovereign bonds traded as low as 47 cents, but the local pension fund industry kept buying the bonds as the internationals left. It is this long-term confidence in the future of the region that has led JPMorgan to maintain a physical presence in Argentina and Venezuela through their wilderness years. A sideways move to Citibank to get closer to the man running the syndicate held little appeal. He was under no illusion that, as an associate, his experience would have begun and ended with creating research reports, with perhaps the odd glimpse of a busy conference room.
So the young Moore went where he could be of most use and gain most access. He went into the non-profit sector, working for the Salvadoran Foundation for Economic and Social Development from to before returning to Morgan Stanley. The experience was transformative, and when Moore rejoined Morgan Stanley in the middle of the s, the bank was building up its presence in the region — ostensibly through underwriting of government and corporate bonds, state privatizations and creating sales and trading desks for the main Latin American asset classes.
The whole notion of Brics is a concept from the past.
Latin America was suffering from the fall in commodity prices driven by a slowdown in China. The negative impact of these external shocks was compounded by recessions in Brazil and Argentina, where fiscal subsidies were being withdrawn and the Brazilian Car Wash, or Lava Jato, scandal added further injury throughout the region.
But despite the short-turn downturn, Moore is convinced that Latin America has been transformed since the beginning of his career. For a start, the scale is now vastly different. The implication is that if true secular growth takes hold from this base, then that growth will create the opportunity for innovative and disruptive companies and industries. The English language is constantly changing, but it is not good at evolving compounds. However, Roberto Sallouti is far less concerned with such linguistic rules than the opportunity he is so excited to convey. It is unlikely that the internal models of the economy upon which the original business plan was based were as rosy as Brazil has today.
The rate curve is flattening as investors absorb the market-friendly policies of the new government and the good initial signs for its ability to implement its policy agenda. Brazilian savers at all levels are facing a sustainable real rate environment that they have never seen before. This is leading to a migration to risk products, as investors move down the credit curve or lengthen tenors or move away from fixed income altogether into asset classes such as equities.
Pretty soon we are going to start to see high-yield credit funds, structured credit funds, securitization of receivables.
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You are going to see this more and more. BTG Pactual is offering the mass market the same fees as its private clients, radically undercutting the costs charged to affluent retail customers of the main banks.
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It is clearly working. The specific allegations of anti-competitive behaviour are less important than the signal that BTG has riled XP, which had become used to being the clear market leader. The line is repeated so consistently it begins to feel like a rare example of consensus. Lacerda does not believe that the increase in financial flows, asset prices and investor spirits will automatically spark a revival in the real economy. It is clearly a concern, because without growth in GDP and an improvement in the real economy, the buoyancy of the financial markets will not be sustained.
And that is the bet of not just locals but of the international bankers that are targeting Brazil to be their main driver of revenues in and We still have 13 million unemployed, and we need the real economy to have a real improvement to get the unemployment rate down dramatically. The expectation for this year was around 3. It will be something right at the level to avoid bankruptcy.
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