Latin America: Variety Adds Spice

Ever-changing political and economic environments keep cash management professionals agile.

Political turmoil, economic volatility and rapidly evolving demands for agile, digital, simplified treasury support for commercial activities are all among the forces buffeting CFOs throughout Latin America.

“Many countries in Latin America have experienced a period of slow economic growth in recent years,” explains Gabriel Kirestian, head of payments and receivables management in Latin America for Citi. “This has been exacerbated by political instability in countries such as Brazil and by economic and currency stresses such as in Argentina and Venezuela. … As a result, the need to optimize efficiency and manage costs to protect margins, and to increase agility to take advantage of future growth opportunities, has never been more important.”

So financial executives must adapt quickly, adjusting structures and processes to assure flexibility and continuity of business.

“New technologies are having a dramatic impact on their business activities, not least in their production, distribution and sales models,” Kirestian says. “This in turn affects companies’ interactions with suppliers, clients and regulators, including the growing use of client and supplier portals and marketplaces. The emergence of instant-payment regulations and the need to support a growing ecommerce business strategy are driving treasurers and finance managers to implement digital banking solutions and services that are in line with this new commercial reality and allow them to both support and drive the business models of the future.”

As the financial industry adapts to support a 24/7 business model, so do corporate treasuries.

“That new paradigm requires a significant shift in technology platforms, support processes and overall treasury mind-set,” he says. “Treasurers in Latin America are facing that challenge while navigating a volatile regulatory and political environment. How well treasurers respond to that combination of factors will determine the success not only of treasury but of the company’s business strategy overall.”

Though regulated, Latin America is not standardized, particularly in cash management. While technology and bank software can help offset variable regulations, companies looking to manage their liquidity there need to employ a flexible approach that accounts for different countries’ own rules governing the types of accounts that can be held and ways that liquidity can be pooled or optimized.

Opportunities to better manage foreign exchange and other risks effectively remain. “A corporate treasurer’s ultimate tool for handling market volatility is adherence to an intelligible and unambiguous corporate risk-mitigation policy, no matter how abstract,” explains Valentina Antill, Citi’s head of strategic risk solutions for the Americas. “Real-time market intelligence can be helpful, for example, in occasionally adjusting the policy to the local market idiosyncrasies—as long as its use does not become overly distracting, causing frequent or profound policy deviations. Finally, the overwhelming, incessant influx of information we are exposed to in this age can confound the ‘broad view’ of a corporate treasurer whose mission is to maintain and improve the financial health and success of a business.”

Latin America

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