FINANCIAL SERVICES ADVISOR a PUBLICATION of the DIALOGUE September 24-October 7, 2020
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LATIN AMERICA ADVISOR FINANCIAL SERVICES ADVISOR A PUBLICATION OF THE DIALOGUE www.thedialogue.org September 24-October 7, 2020 BOARD OF ADVISORS FEATURED Q&A TOP NEWS Ernesto Armenteros Vice Chairman of the Board, BANKING Banco de Ahorro y Crédito Unión Is Peru’s Congress Mexico’s Financial Pablo Barahona President & COO, System Is Stable, Global Retail Markets West, Liberty Mutual Group About to Break the Liquid: Council Felipe Carvallo Mexico’s banking system has Vice President - Analyst enough capital and liquidity to Latin America Banking Pension System? Moody’s Investors Service face the economic crisis stem- ming from the coronavirus pan- Richard Child demic, said the country’s Financial CEO, Mattrix Group System Stability Council. Page 2 Michael Diaz Jr. Partner, Diaz, Reus & Targ MONEY LAUNDERING Ernesto Fernández Holmann Chairman of the Board, U.S. Company Ayucus Fined for Bribes Rich Fogarty Managing Director, in South America Alvarez and Marsal U.S. asphalt company Sargeant Desiree Green Peru’s Congress, pictured above, may allow pension account holders to withdraw 100 percent Marine has agreed to pay $16.6 Vice President, of their contributions. Supporters say the measure is needed to alleviate economic pressure million in fines after pleading International Government Affairs, amid the coronavirus pandemic. // File Photo: Peruvian Congress. guilty to bribery charges involving Prudential Financial officials in several Latin American The economy commission of Peru’s Congress in Septem- Laura Güemes Cambras countries. Transactions Attorney, ber began discussion on a proposal to allow Peruvians to Page 3 Holland & Knight withdraw 100 percent of their contributions into the private Earl Jarrett Chief Executive Officer, Q pension system with the aim of alleviating the economic REMITTANCES The Jamaica National Group stress wrought by the Covid-19 pandemic. What is the likelihood of such U.S. Adds Cuban Thomas Morante a proposal being approved by Peru’s Congress and enacted by President Attorney Remittances Firm Carlton Fields Martín Vizcarra? What would be the most significant consequences for to Sanctions List Manuel Orozco pensioners and the country’s economy? Which other countries in the Senior Fellow, The U.S. State Department has region are likely to follow suit with similar pension withdrawal measures, Inter-American Dialogue added debit card service provider Adalberto Palma-Gomez and what would be the long-term effects of such actions? American International Services to Senior Partner, its list of sanctioned companies. Proxy, Gobernanza Corporativa Secretary of State Mike Pompeo Rodolfo Pittaluga Luis Miguel Castilla, former Peruvian finance minister: said the company is controlled by Adjunct Professor, “In the context of its ongoing populist stance, the Peruvi- Cuba’s military. Florida International University Page 2 College of Law an Congress is likely to approve a modified version of the Fabian Saide proposed bill to, supposedly, alleviate the economic crisis Founder, CEO and President, A that many citizens are currently experiencing. However, this will happen Paykii while the economy is starting to recover and without adequately targeting Roberto Teixeira da Costa Founder & Board Member Emeritus the withdrawal to benefit the most affected households. The government CEBRI is likely to veto this bill (or not formally enact it) in line with the Finance Mario Trujillo CEO, Ministry’s, central bank’s and regulator’s unfavorable opinion regarding DolEx Dollar Express this proposal. Allowing for pension fund withdrawals is a harmful policy because those affiliates who decide not to tap into their funds will experi- ence a fall in the value of their portfolios due to the massive liquidation of assets that will need to be undertaken in a relatively very brief timespan. On the other hand, those affiliates who decide to withdraw their outstand- ing balances will not have the possibility to claim a pension in the future Pompeo // File Photo: U.S. State Department. Continued on page 6 COPYRIGHT © 2020, INTER-AMERICAN DIALOGUE PAGE 1 FINANCIAL SERVICES ADVISOR September 24-October 7, 2020 BANKING NEWS temporary rules that are aimed at avoiding NEWS BRIEFS defaults and losses of collateral. Herrera said Mexico’s Financial the extension recognizes that the Mexican Salvadoran Court Reduces economy will remain fragile for some time. “It’s Ex-President Saca’s System Has Adequate no longer a horizon of a few weeks,” Herrera said, “but a few months.” Among the measures Sentence by Two Years Liquidity: Council are relaxing liquidity requirements until next A Salvadoran court on Sept. 28 reduced former March, furthering a capital buffer through the Salvadoran President Elías Antonio “Tony” Mexico’s banking system is stable, with high end of 2021 as well as a 19-month relief for Saca’s 12-year prison sentence by two years, ju- levels of capital and enough liquidity to face farming credits. dicial authorities announced, Reuters reported. the crisis brought by the coronavirus pandem- Saca, 55, in 2018 admitted to embezzling and ic, the country’s Financial System Stability laundering as much as $300 million from the Council, or CESF, said Sept. 29 in a statement. REMITTANCES NEWS treasury, for which he was sentenced to 10 “The Mexican financial system remains in a years in prison. In 2019, two years were added solid position. In particular, the analysis on U.S. Gov’t Adds Cuba to his sentence for bribery. Upon review of his the risks for the Mexican banking system,” the case, the prison surveillance court ruled that CESF said. The council is headed by Finance Remittances Firm the former president, who led El Salvador from 2004 to 2009, had already served the two years to Restricted List of the sentence related to the second case during preventive detention. The U.S. State Department on Sept. 28 said it is adding a debit card service provider, American International Services (AIS), to its Moody’s Lowers Outlook sanctioned Cuba Restricted List. “AIS is a finan- cial institution controlled by the Cuban military for Peru’s Banking System that processes remittances sent to the Cuban Moody’s on Sept. 28 lowered its outlook for people,” Secretary of State Mike Pompeo said Herrera // File Photo: Mexican Government. Peru’s banking system to negative from pos- in a statement. The U.S. government alleges itive, citing lower profitability in a higher risk Minister Arturo Herrera, and its members that AIS, under its parent company FINCIMEX, of credit deterioration due to the coronavirus include representatives from the central bank, pandemic. The ratings agency said the Andean banking regulators and insurance companies, nation’s banking system was working in a “chal- Reuters reported. The council also said in the The profits earned lenging” environment, which has had an impact statement that the sector is facing substantial from these operations on the sector’s gains during the first half of the challenges, especially regarding the operation disproportionately year and creates volatility for the rest of the of the market, credit flow, containment of benefit the Cuban year and even 2021, Reuters reported. liquidity problems and adequate risk manage- military...” ment. “Some institutions must continue efforts — Mike Pompeo toward diversifying their sources of financing,” the CESF said, adding that, while there are Brazil’s FitBank Plans to “elements of strength” in intermediaries such manipulates the remittance and foreign cur- Expand to More Latin as brokerage houses, entities in the insurance rency market. “The profits earned from these American Nations, U.S. and surety sectors, retirement savings and operations disproportionately benefit the Cu- Brazilian fintech FitBank Pagamentos Eletrôni- investment funds, other financial companies ban military, furthering repression of the Cuban cos plans to open an office in the United and credit unions show “a profile of higher people and funding Cuba’s meddling in Venezu- States in the first half of 2021, as well as start credit risk.” The statement came days after ela,” Pompeo said. “We urge anyone who sends operations in Colombia, Mexico and Peru next Mexico’s finance ministry and banking regula- remittances to family in Cuba to use means year, Bloomberg News reported Sept. 22. In tor announced the extension of tools to allow other than Cuban government-controlled remit- an interview with the news outlet, FitBank banks and financial intermediaries to restruc- tance entities,” he added. FINCIMEX is a Cuban chief executive Otavio Farah said he expects ture loans and other credits to clients, Reuters state company that processes remittances headcount to reach 200 employees next year. reported Sept. 23. As part of the measures, the and issues the American International Services In July, JPMorgan acquired a minority stake in government will extend until next year several card. The government began accepting it in the company. COPYRIGHT © 2020, INTER-AMERICAN DIALOGUE PAGE 2 FINANCIAL SERVICES ADVISOR September 24-October 7, 2020 July amid the Covid-19 pandemic, which has worsened food shortages on the island and sparked long lines for goods, the Associated SUBSCRIBER NOTICE Press reported. FINCIMEX temporarily stopped accepting applications in mid-August due to Laura Güemes Cambras Joins the Financial its popularity, but it resumed them this month. Services Advisor Board In Cuba, the volume of remittances has been decreasing this year, and it is expected to con- We are pleased to announce that Laura Güemes Cambras tinue to drop, despite gains in other countries has joined the Financial Services Advisor’s board of advi- of Latin America, in part due to U.S. sanctions, sors. Denisse Delgado, a scholar at the University of Massachusetts in Boston, wrote recently in She is a transactions attorney at Holland & Knight’s office a blog posted by the Inter-American Dialogue. in New York and a member of the firm’s financial services [Editor’s note: See also the Advisor’s video in- team. terview with Marta Colomar-Garcia, an attorney at Diaz Reus in Miami, on the outlook for U.S.