Miami — The Operational Financial Center For A Growing Latin American Market

Latin America often gets ignored in business and banking, as it does in American foreign policy, but it is made of many economies which are growing and developing a large and  prosperous middle class.  The economic problems — Venezuela and Argentina — often are the only countries that get much attention from North American publications so it comes as a bit of a surprise to learn from bankers and banking technology vendor what an attractive market the Latin American nations are proving to be. Not only are they buying sophisticated technology, they are also developing new technology and running hackathons. A tech demo day in Brazil, which organizers expected would draw 15 entrants, drew 236, and 200 of them were very well qualified.

French President Charles de Gaulle, returning from a state visit to Brazil, supposedly said “Brazil is the country of the future…and it always will be.”

In technology and finance, that future appears to have arrived, although the progress is not uniform across countries or without occasional setbacks. But compared to the no so distant past where brutal military dictatorships were more common than not, Latin America has come a long ways.

Although stable economies in several countries have made local wealth management and investment attractive, Miami is still the headquarters for many of the banks and technology companies conducting business in Latin America.

“Miami is the unofficial capital of the hemisphere,” said Alex Sanchez, president and CEO of the Florida Bankers Association. “Ever since Clinton did a summit in Miami and all the presidents came, it has been known as capital of the hemisphere.”

It is also the banking and business capital.

“A lot of companies from the hemisphere, or America companies that want to do business with the hemisphere have regional or South American offices here,” Sanchez added. “It is sometimes easier to fly from a Latin American capital to Miami and then to another Latin American capital than it is to fly inside Latin America. In addition, people from Latam and Europe and Asia feel comfortable doing business here, and it’s a great home.”

“Geographically, Miami is well located,” agreed Enrique Riley who was born in Mexico and manages the Latin American banking business for Temenos, a financial technology with headquarters in Geneva. Temenos started its Miami operations by following its European bank clients who moved to Miami as their base to serve Latin America.

“Latam is a huge territory — it’s a 10 hour flight to Brazil,” said Riley. “But from Miami you can fly easily to and from any capital. If we were based in Mexico, flying to Colombia could require a stop, but from Miami you can fly to any capital, and sometimes you can get in and back on the same day.”

Temenos has its pre-sales office in Mexico City and support functions and a help desk in Costa Rico and Ecuador and a development partner in Argentina.

“We used to do all our development out of India, but we had some issues with translation and understanding requirements, so last year we started doing regional development, building country platforms, and doing local development work for our clients in Latam.”

In fact, last year Latam was Temenos’s best growing region, said David Arnott, the company’ CEO. “Our win rate was 100 percent,” he added, noting that wealth management offers opportunities for banks and banking technology companies.

Ray Ruga, co-founder of the financial consulting firm CVOX, agreed.

“Miami is an important center for wealth management, and family offices. On the wealth index, we rank seventh in the world.”

Riley said that Latam economies are growing fast and becoming more stable, leading several regional banks to offer wealth management in their home countries. Chile, Brazil and Mexico have a mass affluent class that requires financial advice, and some of the banks are developing a private banking division.”

The people who do business in Latin American don’t minimize the problems they see in Mexico and Brazil, but they are confident that growth will continue and the countries will thrive.

Still, the US continues to provide a safe haven for Latin American money. Even those who keep money in Latin America want to hedge with American investments, especially real estate, said Ruga.

“Look at Venezuela, Argentina. There is flight. Even if the economies are doing well, they hedge. If Brazil does great, Miami does great. If Brazil does terribly, Miami does fantastic.”

“Miami has always acted as a haven for people from the hemisphere,” said Sanchez from the Florida Bankers Association. “I don’t want anything negative to happen to countries in the hemisphere, but sadly it does. And then people want to move to Miami because they feel safer. People move their assets to Miami because they know the US is a country of laws. You will always have the flow of people from the hemisphere to Miami whenever turbulence occurs. We have to make sure we recognize, we welcome, the flight of capital of these individuals because of the freedom.”

Sanchez added the Miami’s appeal could decline if regulations are too onerous.

“Panama is a very competitive with Miami for banking, so we have to be careful. Banking is a good business and we want banking and the related businesses that come from banking to be here.”

uga said the Latin American business has attracted several Spanish banks to set up shop in Miami to get the hemisphere’s business.

“The big entry has been the Spaniards who have acquired local banks,” he said. “We were always very curious what their strategy was, although I don’t know that they do have a strategy.”

Much of the Latin American wealth doesn’t flow directly to banks, it goes into real estate he added.

“A lot of the real estate boom we are seeing is wealth going to real estate. You don’t have the same reporting requirements to buy a condo as to open a bank account — there’s no KYC as required in banking.”

Riley said that banks from Mexico also want to open offices in Miami.

“I think the massive growth in Latin America will continue,” he added. “The slowdown in Brazil and reduction of oil prices will affect Mexico and Venezuela, but at the same time the emergence of the US as the engine of growth that will continue to pull out a lot of these countries in Latam, so we are investing in new territories. Brazil has very, very large potential; it spends more on IT than China.”

Maybe that’s the Spanish banks’ strategy — building business on the growth of Latin America.