Jorge Sáenz-Azcúnaga, global head of Country Monitoring at BBVA, talks with Global Finance about digitization, promising pockets of growth and serving Latin America’s unbanked.
Global Finance (GF): What made BBVA successful in Latin America in 2018, and what’s the outlook for 2019?
Jorge Sáenz-Azcúnaga: Despite a complex environment in some of our core markets, we posted very robust results in 2018, with Latin America accounting for 51.2% of the Group’s net attributable profit, or €2.98 billion ($3.37 billion). Digitization and the transformation of our business have undoubtedly helped us achieve our goals in the region. We have an ever-increasing digital customer base in Latin America, both individuals and companies, which is allowing us to use digitization to boost activity and new customer growth. Additionally, our Corporate and Investment Banking (CIB) unit is very committed to the region, participating in leading projects in corporate lending, project finance and also in the “green” arena, with the first green loan in the region.
In 2019, we expect activity to evolve at a good pace, with our franchise in Mexico keeping solid growth, in line with last year. We also have good prospects for Colombia and Peru. Argentina will continue to be impacted by lower credit activity, given the economic context.
GF: What is the region’s growth outlook? Which industries could do especially well?
Sáenz-Azcúnaga: Latin America is steadily increasing its growth rates from the lows of 2015 and 2016, when a strong recession in Brazil dragged down the regional average. This year, we expect growth of around 2%, increasing to close to 2.5% in 2020. Of course, the region is highly heterogeneous and the biggest economies—Brazil, Mexico and especially Argentina—are underperforming relative to the Andean economies, Colombia, Peru and Chile, which will continue to display strong growth both in 2019 and 2020. But we think the recession in Argentina may have bottomed out, and this year should see the start of a recovery.
We think sectors geared toward domestic demand, especially consumption, will be strong in 2019 in places like Mexico, Colombia and Peru; whereas the agricultural export sector will be the most dynamic one in Argentina, and mining in the case of Peru.
GF: BBVA Continental also won a prize for Peru. Can you comment your banking operations there?
Sáenz-Azcúnaga: We have very positive views on Peru, both in terms of economic performance—we expect GDP growth close to 3.9% this year, after an excellent 2018—and also in terms of banking penetration, where we still see room for financial inclusion and increased use of credit.
BBVA runs the second-largest bank in Peru, and we strive to lead the transformation of the banking sector, leveraging the rapid digital adoption. Being a global institution allows us to “import/export” digital developments from all the countries where we have a presence. In addition, we run a microfinance entity in Peru, Financiera Confianza, to help very small businesses with no access to bank credit.
GF: Latin America has a high percentage of unbanked. What is BBVA doing to address this?
Sáenz-Azcúnaga: While Latin American digitization has arrived later than in developed markets, the pace of adoption has increased dramatically. We see digitization as a catalyst for societal and economic change. That does not mean moving away from traditional banking; our branch networks and colleagues are an essential part of the value proposition we present.
GF: How important are small and medium-size enterprises to BBVA’s business objectives in Latin America?
Sáenz-Azcúnaga: SMEs are highly important in the region; these companies create millions of jobs. We want to assist them so that they can expand their markets, increase productivity and join global value chains—in essence, to grow as companies and support the societies in which they are immersed. Peru alone has 2.3 million companies, of which 95% are micro-enterprises and 4.5% are SMEs. Only 40% of micro-enterprises and 60% of SMEs currently have access to credit, and less than 3.5% of SMEs export. We see a lot of ground to cover in this segment, and banking institutions have a leading role in this transition.
