u
economy
Latin America
What'sNewS Issue 10-October 1998 9
now results in a partial capital write-off.
Crisis measures taken by the Ukrainian
central bank effectively prohibit hedging
against devaluation and restrict the way
we operate. At the same time, clients put
Itheir plans on hold, they are reconsidering
their presente or scaling back. On the
other hand, this crisis offers opportunities,
both for corporates and for banks.'
In spite of these not insignificant setbacks,
RI has decided to go ahead with plans to
set up a fully-fledged bank. 'We will be
targeting fee-income as main revenue
source and rely less on interest income.
Furthermore, we invest in assets with the
optimal risk/return profile.' Tuinstra says.
'We have also accelerated a great deal of
investments in fixed assets for the bank
(such as computer systems) which we had
to make anyway. By doing this, we spend
local currency. We have to act cautiously
and be creative in this uncertainty so that
we can grab opportunities to set up
business.' Acting cautiously includes
fcroviding daily updates to headoffice on
^levelopments in Ukraine where the IMF
and World Bank are
already involved in
building a package
that could get the
country back on its
feet comparatively
soon. 'We're expecting
to see some
improvements after
the first half of next
year,' says Evangelisti.
'We have decided in
consultation with
EBRD, the other
major shareholder, to
go ahead with our
plans, although
initially very
^ontrolled. In the
meantime, we're getting the office
operational so we'11 be ready to step up
business in this country once known as
Europe's bread basket.'
Jorge Christoffanini and Francisco Cuesta,
Chile:
Providentia, the newly developing
business district in the Chilean capital, is
booming. On many streets, every second
lot is a building site. Lunch times see
crowds of prosperous looking office
workers stream out of glossy high rise
blocks that seem so new you wonder
whether the paint is dry. It is not that
Chileans are unconcerned about the crisis
in Asia and neighbouring Latin American
countries, specifically Brazil, but most are
equally convinced that their own economy
is stable enough to ride the storm. 'We
may not be looking at the 6 to 8% growth
we've been used to in recent years,' says
Cuesta, but the forecasted 5% for this
year is still respectable.'
According to our people in Santiago,
1997 was a tougher year for Chilean
business. Around 30%
of exports go to Asia,
especially Japan. 'We
have seen no decline in
terms of volume,' says
Christoffanini, 'that
has actually risen. But
pricing and
commodities, such as
copper which is one of
our top exports, and
wood pulp have been
down.' What appears to be Chile's biggest
problem, also shared by Argentina, is
that it tends to be luntped together with
other 'emerging markets' that are not as
solidly structured. 'While
we are certainly an
emerging market,' argues
Cuesta, 'and while it is
certainly true that
globalization and
economie
interdependencies are a
reality; and that it is
almost impossible to
cushion your own
economy frorn turbulence
in other countries; and in
spite of the fact that as a
region, Latin America is
certainly vulnerable
because these economies
mm mmm i
are still in development.
In spite of all these
realities, Chile is better placed than most
to get through this difficult period. You
have to remember that crises today are the
result of decisions taken a long time ago.
Jorge
Christoffanini
Francisco Cuesta
Erik Heyi
There is little you can
do now about the
causes. What you can
do, and I think
everyone in the
network is responding
in a similar way, is to
generate creative
inileage out of the
situation. This is an
ideal environment to
create value, new ideas, new structures.
And these can be applied and made
profitable without all the need for capital
or resources other than our own
innovation, know-how and experience.'
Erik Fieyi, Argentina:
Like Chileans, Argentineans also feel
they are seen too often as just another
Latin American emerging market which
has little to distinguish itself front the
generally unstable
pack. For quite some
time now, Argentina
has ntanaged to
maintain a stable
economy following
the hyper inflation
that used to be
synonymous with the
country. 'Argentina
has faced tremendous social, economie
and political difficulties in the past,' says
Heyl, 'they've always survived.' One of
the keys to recent survival was the
eradication of inflation and the
apparently sustainable peg to the US
dollar. Like their neighbours in Chile, the
Argentineans feel it is unrealistic to see
their economy as no different from, say,
the emerging markets of Asia.
Privatization in the country is advanced
to a stage whereby not even the post
office is domestic owned these days. 'No
less than 45% of banks' deposit base is
in the hands of foreign institutions,' Heyl
adds. 'There is also significant
transparency in accounting and in the
regulatory system. The current situation
has allowed us to put much more
urgency on our need to change our focus
as a team towards working on value
added and fee driven products, mainly
advisory mandates and intermediating
financial structures.' For Argentina there
is also a significant reliance on foreign
loans that represents a major problem
for this country, especially as the crisis
creeps closer to Argentina's door. But
perhaps the greatest threat to this
country which currently has high
unemployment (13%), but a very good
