GC Friday Interview: Alvaro Camuñas, Regional Head of Spain, Portugal and Latin America at BNP Paribas Securities Services

This week, Latin America got a bit of a boost when Mexico completed its first trade within the Mercado Integrado Latinoamericano (MILA) framework, which links the capital markets of Mexico, Colombia, Chile and Peru. The rest of the region is quite fragmented, but in some areas, there is quite a bit of reason for optimism. Alvaro Camuñas, regional head of Spain, Portugal and Latin America at BNP Paribas Securities Services, shares his thoughts on developments in the region.
By Jake Safane(2147484770)
This week, Latin America got a bit of a boost when Mexico completed its first trade within the Mercado Integrado Latinoamericano (MILA) framework, which links the capital markets of Mexico, Colombia, Chile and Peru. Euroclear also reached an agreement with Mexico to service corporate debt from the country, thereby making it more accessible to international investors. The rest of the region is quite fragmented, but in some areas, there is quite a bit of reason for optimism. Alvaro Camuñas, regional head of Spain, Portugal and Latin America at BNP Paribas Securities Services, shares his thoughts on developments in the region.

GC: What has caused BNP Parbias to want to become a local custodian in more Latin American countries, and what other markets are you eyeing in the region?

AC: The opening of new markets in Latin America is a combination of client demand, because what clients are seeing is tremendous growth, for example, of the Brazilian economy over the last 10 years; it’s true that right now it’s not growing at the same rate as before, and they might have to make reforms, but at the end of the day, Brazil is the sixth largest economy in the world and is going to be one of the main markets anyway. Also, the region has seen significant political stabilization in countries like Colombia and Peru. Traveling in those two countries today, for example, is nothing like it was 15-20 years ago, and that is definitely helping them to boost their economy.

So clearly on one side there is an increased interest from our clients for those countries, and at the same time, the opening of these markets for ourselves confirms the decision we made years ago, especially after the Lehman and Madoff scandals, where one of our objectives was to have at least 90% of our clients’ assets held directly with ourselves, without having to use a third-party, without having to use a sub-custodian. So that’s one of the reasons in the last three or four years we’ve opened in countries like Brazil, Colombia, and we are continuing to look for other possibilities in the Latin American region. The next one in the pipeline is Peru.

GC: What about some of the smaller markets in Latin America like Ecuador, Panama, etc.? Is there much interest to offer services there?

AC: As a group, we don’t have any presence in those markets, so it’s difficult for just Securities Services to start from scratch without having support from the group, if they are not important markets for us. So for the time being we are not contemplating opening in those markets, unless they join MILA and then we can find a solution jointly with MILA to be able to cover those countries from Colombia. At the end of the day, that will be our main hub for the MILA countries. But as of today, there’s no plans to open in those other markets.

GC: How do you think BNP Paribas will benefit from MILA?

AC: We see MILA as the Euronext of Latin America. What we would like is to have the capabilities to offer services for MILA from a central hub, the same way we are offering services for Euronext markets from a central hub, with one connection being able to cover all the different markets, and more importantly for us, offering a harmonized service as much as possible, in order to avoid having clients feel the difference between one market and another.

GC: How has the region made improvements in order to set the stage for the next Euronext?

AC: There has been significant progress. I think MILA has concentrated a lot of efforts around execution, and what we are expecting and what we are seeing is that the next steps will be more concentration of all post-trading, and it will facilitate the interoperability between CSDs. We’ve probably seen more significant progress on paper, and now we are expecting this progress to materialize in decisions going forward.

GC: Does the fact that Latin America lacks a common currency like the Eurozone or harmonization projects like TARGET2-Securities make it difficult for the region to end some of its fragmentation?

AC: Obviously having a single currency facilitates the process, but at the end of the day it’s just an issue of finding the forex rate you want to use, and I don’t think that’s that important. For me, what is much more important is that MILA is not a standalone project; it’s a project that is sponsored by the Pacific Alliance, and this is a political agreement between the presidents of Chile, Colombia, Peru and Mexico, so there is a political will to strengthen the relationship between those four countries, and I see MILA as a clear instrument of that political decision. That’s why we are quite supportive of the project, and we believe that even though it’s taking time—and all projects like this take time—it will materialize in much more concrete developments in the short term.

GC: Is there room for more service providers in the region?

AC: Latin America has traditionally been a region dominated by Citi as the only provider in most of the countries except for Brazil and Mexico. Today, with our entrance, there is more competition in the market, which I think is positive for everyone, and other institutions like Deutsche Bank and Itaú are also very much interested to cover these markets on a regional basis. I think there’s room for one or two more providers. I don’t think the region is big enough to have that many more, but competition is always good, so we will definitely welcome more competitors to the market.

GC: In your own role, how do you link Spain and Portugal to Latin America? Other than the languages, what are the connections?

AC: It’s much more than just the language; it’s clearly a business connection and a cultural connection. For example, the vast majority of insurance companies in Europe are organized in a way where they have a region called Peninsula Iberica and Latin America.

The commercial flows between Spain and Latin America are huge. A significant portion of direct investment in Latin America is coming from Spain, and clearly for us we see Spain as the entrance hub for Latin America.

Editor’s note: For more perspectives on Latin America, read our feature in the Winter magazine.

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