China and Latin America The BBVA Experience
José Ramón Perea BBVA Research – Emerging Markets ESIC – June 2011
ESIC / Junio 2011
Outline Section 1
Aspects of the Latam-China nexus Section 2
The role of BBVA
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ESIC / Junio 2011
Section 1
The good: cycle smoothing On the upside, China has become a buffer for LATAM’s business cycle allowing the region to resist the latest world crisis China and LATAM GDP
17%
% Growth Rate Source: ERD BBVA
14 12 10 8 6 4 2 0 -2
2000 2001 China
2002 2003 2004 2005 2006 2007 2008 2009 2010 LATAM*
LATAM*: Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela
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ESIC / Junio 2011
Section 1
The bad? Fear of Dutch disease • In spite of rising exports, there are some concerns regarding the dependence on commodities in
deterred of manufacturing sector Export Concentration in Products for Selected LATAM Countries Herfindahl-Hirschman index* by product (2000 and 2009) 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 Herfindahl-Hirschman index*: this concentration measure takes into account the share of each exported product in total exports. Where export shares of single products are high, the indicator takes a higher value.
0.00
Venuzeula 2000
•
Chile
Peru
Colombia
Argentina
Brazil
Mexico
2009
Avoiding a case of Dutch disease requires investing in innovation and infrastructure, involving the private sector in R&D projects and implementing good fiscal policy. This creates new opportunities for China’s FDI in the region Page 4
ESIC / Junio 2011
Section 1
The “not-so-ugly”: FDI diversification China’s FDI investment is not only in natural resources extraction. There are also relevant projects for the manufacturing industry which will help to avoid exports concentration LATAM: FDI projects announced for the manufacturing industry by technology intensity in 2009,% High
Source: ECLAC
Medium-low
US Chile, 1%
31%
Germany, 1% Korea, 4% Japan
Netherlands 24%
9%
Brzil Others, 1% Germany, 1% Spain, 2% France, 3% Italy
13%
Switzerland
Spain Canada
Low Others
5% 6% 6%
US 31%
Others, 4% Switzerland, 3%
7%
93%
13% Chile
Luxembourg
China
Medium-high Italy, 3% Switzerland
29%
5% 28%
17%
France
31%
14%
US
14% France
China Note: manufacturing industries are grouped according to whether their technology use is high, medium-high, medium-low or low. This classification is based on expenditure on R&D by industry as a percentage of the value added or as a proportion of production for 12 OECD member countries for the period 1991-1999 (OECD, 2009a)
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Outline Section 1
Aspects of the LATAM-China nexus
Section 2
The role of BBVA
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ESIC / Junio 2011
The international expansion of BBVA. LATAM: A historic conjunction of “push” and “pull” factors Poncebank (Puerto Rico) Banco Excel (Brasil) Banco BHIF (Chile)
•
• Safeguard strategy against EU competitors • Mature domestic market •
Banco Ganadero (Colombia) Bancos Cremi y Oriente (México) Banco Francés (Argentina)
Push
Pull • Economic reforms in LATAM
Bancomer (México)
• Under-provision of banking services •
Bilateral factors: • Cultural and linguistic affinity
1995
1996
1997
1998
Banco Continental (Perú) Probursa (México)
1999
2000
2001
Provida (Chile) Consolidar (Argentina)
Banco Provincial (Venezuela) B.C. Argentino (Argentina)
2002
2003
2004
2005
2006
2007
2008
2009
2010 2011
Granahorrar (Colombia)
Reposicionamiento en Brasil
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ESIC / Junio 2011
The international expansion of BBVA. 1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010 2011
BBVA in Asia CITIC (China) • Tapping the most important region for future global growth: a global bank MUST be in Asia to remain global.
Ampliación acuerdo CITIC
Nueva ampliación acuerdo CITIC
• Entrance in China justified by a well regulated banking sector, through a market leader in China, also with access to Hong Kong financial markets. • Great potential for most banking services (Wholesale, Retail Banking, Investment banking, pension funds, private banking, etc.) • Leadership in trade and project finance in Latin America made the expansion into Asia a natural move, just as trade and investment links between both regions increased. Page 8
ESIC / Junio 2011
Section II
CITIC - Shareholding Structure Public Shareholders
CITIC Group
BBVA
62.33% 22.67%
15%
CNCB 70.32% 29.68%
CIFH
40%
CIAM
100%
CBI
27.5%
CCHL
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ESIC / Junio 2011
A unique business platform… Section 4
• CNCB:
The role of BBVA
• Universal bank, leader in China • Extensive retail franchise across the mainland. • Strong support from CITIC group • CIFH: • Leader in the provision of commercial and offshore financial services in Hong Kong. • BBVA:
China
Hong Kong
US
• Strong presence in Europe and the Western Hemisphere México Panama Venezuela Colombia
…a formula for success • Different geographical expertise leaves ample room for synergies and exchange of know-how.
Peru Paraguay Uruguay Chile
Argentina
• BBVA emerges as a key player for the China-LATAM relations. Currently we have corporate & investment banking, and trade finance solutions for firms with business on the two regions. Page 10
China and Latin America The BBVA Experience
José Ramón Perea BBVA Research – Emerging Markets ESIC – June 2011
