GC Friday Interview: Jairo Namur, Head of Latin America, SWIFT Americas

At the SWIFT Business Forum in New York in March, the company noted that in addition to launching projects such as the KYC registry and an analytics tool, the firm would be making a larger push into Latin America. SWIFT has several initiatives planned in the region, such as the imminent opening of an office in Mexico and the April 28th implementation of a solution for connecting Panama’s CSD to Euroclear. Jairo Namur, head of Latin America for SWIFT Americas, speaks with Global Custodian about the company’s activity in the region.
By Jake Safane(2147484770)
At the SWIFT Business Forum in New York in March, the company noted that in addition to launching projects such as the KYC registry and an analytics tool, the firm would be making a larger push into Latin America. SWIFT has several initiatives planned in the region, such as the imminent opening of an office in Mexico and the April 28th implementation of a solution for connecting Panama’s CSD to Euroclear. Jairo Namur, head of Latin America for SWIFT Americas, speaks with Global Custodian about the company’s activity in the region.

How would you describe your plans in general in Latin America?

JN: In general our presence in Latin America has historically been in the banking space. I would say about 95% of the banking community has been connected to SWIFT already, and we really hadn’t focused on the securities segment, both for cross-border needs and domestic needs, which is where we really want to get on. So the last three years we started to take a look at the securities space, primarily in five key countries—Brazil, Mexico, Chile, Colombia, Peru. Initially we realized we don’t have too many brokers-dealers in the community connected. We do see a lot of activity from custodians both global and local, but primarily the traffic on SWIFT is related to cross-border activities—investors outside of those local countries and buying assets internally, and a bit of the information that needs to be shared outside. What we started to do is focus on the CSDs and broker-dealers. So initially what we’re seeing is talks with DCV (Depósito Central de Valores) in Chile, we’re talking to Cavali in Peru, Indeval (Mexico’s CSD) is connected already—they’re using us primarily for their payment traffic or for their connectivity with the ICSDs. That’s sort of the first venture with the CSD. Now we’re trying to work on the communication between the custodian and bringing on the broker-dealers in those communities. We’ve been doing a big pitch and have had some success in Mexico getting the broker-dealers on, we’ve had some success in Colombia getting the broker-dealers on, and just trying to close that whole circle for the post-trade space, which is the area that we see as being most inefficient in Latin America.

Why did you choose these markets?

JN: They’re the largest and most active markets [in the region], and most of them are related to the MILA initiative. Obviously Brazil on its own is such a large market. In Brazil we’ve been for years trying to crack the domestic market, but they’ve had some starts with their own project [to develop automated and standardized solutions]…What we’re trying to do is put some automation around the post-trade space. We initially tried to approach this as a vendor, [but Brazil has] been going their own route. We did give them some standards expertise, which is where we’ve had some success, adding that to ISO2002 discussions that are underway, adding that to gap analysis—we’ve done some gap analysis on the ISO format in Brazil and Colombia—but In Brazil they still are going down the path of trying to find the solution themselves. So what we’ve been doing while they’re building that solution is seeing if we can we put in some tools and put in a pilot. We’ve launched a pilot program that’s going to start in May where we’ve gotten together some of the outside asset managers and some of the local custodians to start testing some flows through SWIFT using our translation tools like ISO 20022, and just testing that connectivity for them to get a feel that we can actually do this. Once we’ve shown some success in Brazil then we can export that model.

What are SWIFT’s plans for opening offices in the region?

JN: One of the things that we decided to tackle is the whole capability of being local. In Brazil we have people in the ground; that was our first foray into Latin America with our Sao Paolo office. For Mexico, we are opening an office effective May 1. A lot of that has to do with being very local, trying to address the community on a local basis, speak the same language, but more than anything, have that continuity, because it’s very difficult traveling back and forth—how often do you get back, how often do those conversations keep going versus having somebody on the ground? In Colombia we have a business partner and are also in the process of hiring a SWIFT-based employer to specifically tackle the securities industry. There’s one significant event that we’re particular tuned into right now that will change the landscape of Colombia, which is the decree that just came out that creates the role of the custodian, and we’ve been active with that. There’s three or four clients of ours that have traditionally played the role of custodian in global markets, and the community is trying to solve the mandate of that decree, but at the same time we’re seeing an opportunity to link the needs of that decree with trying to make the post-trade space in Colombia more automated as well. So we’ve had discussions both with Deceval (the CSD), [the stock exchange], the central bank, the association on both the trust company side, the bank side and the broker-dealer side, to see how we can automate that post-trade process in conjunction with trying to solve the requirements of that specific decree. Peru we will manage from the Colombian office, and there is some internal conversation about moving some of our resources into Chile as well, but that’s still in the early stages.

The markets each have different projects going on, so for Chile we have Comder, which is the central counterparty for OTC derivatives going in place. We assisted them with some standards consulting to get them up and running. Those flows will go over SWIFT as well with a live date towards the end of the year. In Peru, we’re in the middle of a discussion with Cavali where they’re trying to look at several different projects over the next couple of years, one is obviously their ICSD connectivity first, and then followed up by some work on corporate actions. We expect them to be connected to SWIFT in the very short term. And once that happens, the only [MILA country] that we have missing for connectivity is Deceval in Colombia; hopefully this Colombia project will help us tie them in, and then we want to take a look at the needs of MILA once all the players are connected to SWIFT.

What would you be doing for MILA participants?

JN: We don’t think we’re really going to be replacing their trading side of things; so the MILA per se—the connectivity between the CSDs and exchanges—we don’t think that’s our space really. But what we’re trying to send a message is if any investor wants to invest in any MILA country, obviously the attractiveness of the market will depend on their knowledge of how the rules work and their knowledge of how they need to engage from a SWIFT network a security perspective. So tying in the post-trade flows of those four countries—Mexico will come into MILA very soon—and making that as uniform as possible and as transparent to the investor as possible is I think something we can add.

Is there a specific reason for why you’re expanding in Latin America now?

JN: Most of the markets are trying to look at how they can modernize and make themselves more attractive. In some of these markets, since you don’t have a lot of issuers, what they’re trying to do is make the retail investment cheaper. In the U.S. you can go online and do a trade for $5.99. In Latin America, you don’t have that. In Latin America you see a lot of paper being shifted still, payment orders being done on paper and delivered by messenger. All of those costs of lack of automation end up in the chain of doing a trade. Unless they automate this process and make it very efficient, it won’t be worth it for the retail investor to really get involved. The percentage of investment compared to GDP in some of those countries is very, very low compared to countries like the U.K. and U.S. And it has a lot of room to grow.

I think CPSS-IOSCO is also a guiding factor in all of this, making [CSDs] look inwardly at what systems they’re using, what their resilience looks like, are they using best practice, are they using systems or critical service providers that are reliable, and that’s where we become more and more attractive than before.

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