Tackling the crisis - II
Monitoring FX
Welt positioned
Client rating
>Argentina in focus
Election year
In October last year, we reported on the state of play in our Latin American
network. Argentina, Brazil and Chile were all facing major problems and media
reports are anything but optimistic about the short-term forecasts of this
important region. But how have our own people fared through the crisis that
has held a continent in its grasp for months? We checked in with Sao Paulo,
Buenos Aires and Santiago to find out.
O What sNewS Issue 2 February 1999
After the Tequila
effect, Asian 'flu
and Russian roulette,
the last few months
have been dominated
by the Caipirinha or
Samba effect. Brazil has
been tottering
continually on the
brink of disaster, though our people in
Sao Paulo appear to believe the country
may be at least seeing a glimpse of light
at the end of a very long tunnel. Willem
Cramer, Brazil's general manager, talked
to various Rabobank International (RI)
departments on the
actual situation.
The Sao Paulo
team is
comparatively
optimistic - a
mood that given
current doom and
gloom media
coverage seems out
of kilter with Willem Cramer
perceived wisdom.
'Perceived, perceptions, that's a very
good starting point when you talk about
this crisis,' he says. 'Much of what you
hear via the media and how you
interpret it depends on your own terms
of reference, your own perceptions. You
must remember that Latin America is
not Europe or the US. Nor is it
Southeast Asia. Having said that, Brazil
certainly displays a serious economie
imbalance which will require a lot of
effort, hardship and luck to rectify.'
Cramer is loathe to contpare Brazil with
Southeast Asia because, he argues, the
local situation has a number of very
different components. 'There is not the
unquantified external private debt that
has been so surprising for many Asian
countries in the past couple of years,' he
says. 'Brazilian history has given people
here a very real fear of external debt
crisis, so the central bank has been very
careful to monitor who is borrowing what
and what is owed in foreign exchange.
The availability of evidence indicates that
Brazil will meet its financial commitments
which, among other things, will depend
on continued cooperation with the IME'
For financial institutions, it is almost as
though carnival has lasted for months,
rather than days. 'All of the serious
players in this market have not lost
money during this crisis,' Cramer
confirms. 'RI is no exception.' But the
team is more excited about the fact that
they seem to have managed to avoid the
more devaluation exposed sectors. 'Our
customers are having a field day,' he
adds. 'We've been preparing for this kind
of contingency for a long time - in close
and constructive cooperation with our
colleagues in Utrecht and London -
crises are not new to Brazil and if you
talk to people here, they'11 teil you this
is the fourth or fifth time they've been
through this in the past ten years. So we
also were able to put our house in order
as best we could and make sure we were
well positioned.'
One of the ways they have put their house
in order is to monitor customers
continually. 'Our portfolio is almost
exclusively pre-export finance,' Cramer
says, 'and as already mentioned, our
customers are doing very well out of this
situation because they have dollar income
and local currency costs. So in that
respect we are in a sound position.
However, we still rate our clients regularly
to make sure nothing has changed.' Given
the media hype, for many people in RI,
this seemingly relaxed attitude is perhaps
difficult to understand. Yet, Cramer
argues that as an organization we have
certainly become more mature in handling
this kind of situation. 'If I look back, even
over the last year, I see that our approach
in Brazil, and the professional way our
team has tackled the difficulties, has built
confidence in Utrecht and around the
world. I'm not saying we can sit back and
relax, but we do feel we have prepared
the bank to the best of our ability.'
To the south, our
Buenos Aires team is
i also coping well with an
equally difficult
situation. There,
k however, they are
working in an
1 environment where
events emanating from their huge
neighbour, Brazil, have far-reaching and
not always controllable effects on the
domestic economy. If you talk about
domino effects without anything actually
collapsing, then the Argentina-Brazil
relationship is an excellent example.
'Much of what
happens here in
the near term will
depend on the
depth of the
Brazilian crisis,'
remarks
Argentina's
general manager
Chris Abbenhuis.
'On the other Chris Abbenhuis
hand, even though
we are facing a moderate recession in this
country, there is no indication we'11 see a
devaluation of the currency.'
Although there is
little chance of
relinquishing the
dollar peg in this, a
presidential electoral
year, the devaluation
of the Brazilian
currency has hit the
country hard. 'We've
seen a credit crunch and high interest
rates,' notes Eric Heyl from Argentina's
corporate finance. There has also been a
lot of speculation on whether the
Argentinean market is being flooded with
Eric Heyl
