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October 22, 2014
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Itaú highlights Argentina’s potential

Itaú bank is one of Brazil’s largest investment companies.

Investment bank CEO Cândido Bracher considers country is ‘subbancarized’

Despite finding itself fighting off recession and a potential debt default, Argentina looks pretty promising for the Brazilian investment bank Itaú BBA as it aims to expand across Latin America.

Itaú BBA has a foothold in Chile, Colombia, Mexico and Peru, which are all countries that have shown their openness to foreign investment and that — unlike Argentina — have seen vibrant activity in their capital markets this past decade.

But despite everything, asked to choose a market in which Itaú BBA would like to expand in the future, its CEO Cândido Bracher named Argentina because of the firm’s long-term presence in the country and its perspectives on the future.

“Argentina is perhaps the country with the biggest potential because of its large market. It’s sub-bancarized and we have a certain competitive advantage” there, said Bracher in a recent interview with Reuters in Itaú BBA’s headquarters in Sao Paulo’s financial district. “We have to wait, however, for a more stable economic environment.”

After establishing an all-out wholesale banking unit in Chile, where it is competing head to head for business with larger global rivals, Itaú BBA is also gaining visibility in Mexico and Colombia.

Bracher has set Itaú BBA the goal of becoming one of the five main investment banks in terms of fee revenue in the five Latin American countries where it operates besides Brazil.

Itaú BBA, which began its banking operations in Argentina in 2006, is looking to replicate the business model of its Brazilian unit across the region.

On the same note as Bracher, the parent company Itaú Unibanco Holding SA, the largest bank in Latin America by market value, is seeking to ensure its international operations comprise 25 percent of its consolidated profits within the next five years, up from the current 15 percent.

Itaú BBA offers financial advice, sales, operations, loans, cash management and treasury services to 300 of Argentina’s biggest companies, with a team of 104 people led by banker César Blaquier.

Even so, any attempt to expand the loan portfolio of US$900 million that Itaú BBA has in Argentina will take time, Bracher said.

Argentina’s economy, the third largest in Latin America, is in recession and a high rate of inflation is eroding household spending power. Foreign currency reserves are close to their lowest levels in eight years and budget deficit is close to six percent of the Gross Domestic Product (GDP), one of the highest in the region.

President Cristina Fernández de Kirchner has until the end of the month to avoid a default. Argentina could not pay US$539 million in debt interest last month because a US court blocked the deposit on the condition the country also pay holdout bondholders that did not accept 2005 and 2010 debt restructuring deals.

Signs that the president is toning down her anti-market rhetoric are helping to revive interest in Argentina. In the last few years, she has compensated the Spanish firm Repsol over the nationalization of its Argentine subsidiary and managed to settle an old debt with the Paris Club.

What’s more, the main presidential candidates for next year’s elections are promising more investor-friendly policies.

André Esteves, the CEO of Grupo BTG Pactual — Itaú BBA’s rival — this week also expressed his intention to expand in Argentina in the coming years.

Herald with Reuters

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