Latin America has long been a market which has attracted interest from the US private banking houses as well as Swiss partnership operators....

Latin America has long been a market which has attracted interest from the US private banking houses as well as Swiss partnership operators. The flow of funds has typically been to expatriate assets out of the continent. However, it seems that home-grown Latin banking is now also beginning to flex their muscles and take an active interest in managing the wealth of the HNW tier throughout Latin America and offshore. Indeed, activity by Banco Bradesco has forced the wealth management industry to look more closely at the Latin American market and where it might be heading. Banco Bradesco, the largest bank in Brazil, has recently purchased the Luxembourg based Banque Banespa Internationale, an expansionist move that could have two connotations for wealth management policy in Latin America. One view is that Banco Bradesco is taking the opportunity to expand its infrastructure outside the continent to fulfil increased customer demand to invest assets abroad. Latin America’s notoriously unstable economic and regulatory systems have led many to look for stability of investment elsewhere. This policy it would seem has been adopted by numerous institutions such as Banco de Credito del Peru and the Mexican, Banorte Asset Managament who have both opened offices in Miami and Seattle respectively. Indeed, the choice of Seattle is an intriguing diversion from the normal route offshore by most Latin players. The stability, or instability, of Latin American economies has constantly been an issue when domestic banks vye for private client assets. Venezuela’s President Chavez recently threatened to declare a state of banking emergency to stop capital flight, a move reprimanded by the country’s banking officials as unsettling. Meanwhile, Argentina has currently experienced financial concerns that had stopped Banco Bilbao Vizcaya Argentaria from buying out minority shareholders of the nation’s second largest player, Banco France. Even Brazil, Latin America’s largest market, has forecast inflation to rise above 6% and has indirectly been affected by the turmoil in Argentina. Mexico, the regions biggest economy, will be hit hard by the events in the U.S., with whom Mexico transacts 85% of exports. The current Latin American situation has therefore lead leading analysts to recommend a postponement of expansion activities in the region. However, an alternative view would suggest that Latin American banks have been building on the client base that is evident in their own backyard. Recent figures infer that the Latin American market is becoming increasingly prosperous. The average wealth among HNWs in Latin America, according to statistics produced in the World Wealth Report 2001, rests at US$17.4 million. While the number of HNW individuals remain low at 190,000, the average wealth is indeed impressive and could potentially feed the growth of domestic banks. Global Wealth Distribution Region Total wealth Total HNWs Average Wealth/HNW N. America US$8.8 trn 2.54 m US$3.5m Europe US$7.2 trn 2.31m US$3.1m Asia US$4.9 trn 1.7mn US$2.9m S. America US$3.3 trn 190,000 US$17.4m Middle East US$1.3 trn 220,000 US$5.9m Eastern Bloc US$0.9 trn 200,000 US$4.5m Africa US$0.6 trn 40,000 US$15m Source: Merrill Lynch Cap Gemini Ernst & Young, Scorpio Partnership Research by ABN Amro has found that Brazil, where one third of Latin American HNW wealth can be sourced, is worth US$1 trillion. On this research, ABN has indicated that Latin America as a whole is worth US$3 trillion – 30% shy of Merrill Lynch Cap Gemini figures. Meanwhile, Brazilian state press have also estimated that over 100,000 families have between US$100,000 and US$1 million in assets, Merrill Lynch argues that the number of families that fall in this category is nearer 200,000. This evidence provides analysts with an insight into the clear potential of the Latin American market. While the domestic players begin to flex their muscles, foreign banks are keeping a watchful eye on the Latin American situation. The potential of Latin American markets, particularly Mexico, Brazil and Argentina, is in no doubt. It is this potential which has led banks, both foreign and domestic, to establish offices outside Latin America through which the wealth of the region can be passed. The reluctance on behalf of foreign banks to build an infrastructure in the region and the lack of client confidence in Latin American economies does infer that, for the time being at least, the region is perceived as a risk.