Latin American banking industry to see more investment.

Despite the financial turmoil, Latin America’s banking industry is set to attract increased levels of investment, according to the just-published Economist Intelligence Unit report, Globalization winds in the Latin American banking industry, sponsored by MasterCard Worldwide Latin America & Caribbean. Indeed, a large majority of global executives surveyed expect that a greater share of revenue will come from Latin America over the next five years. This trend is highlighted by executives based in North America in particular. At present, 61% of them say the region accounts for less than 10% of their revenue. However, when asked about their five-year plans, only 23% of respondents expect that the region will account for such a small share of their revenue, according to the report.

The report which consists of a survey of 208 financial services executives from around the world, concludes that the global economy is expected to have a greater impact on company operations than local markets in the medium term. The main risk to this scenario is the impact the international financial turmoil may have on the region. While Latin America is indeed perceived as being as vulnerable as other emerging markets, it is also viewed as less fragile than in the past, which is a sign of greater investor confidence in the region.

“The Latin American banking industry is still relatively underdeveloped,” says Kim Andreasson, senior editor, Industry & Management Research at the Economist Intelligence Unit. “And, as the survey confirms, international financial institutions are increasingly looking to capitalize by expanding their operations there.”

“The Latin America region is becoming an important player in global commerce. However, the opportunity to develop the financial services industry is still very significant,” says Richard Hartzell, president of MasterCard Worldwide Latin America & Caribbean. “These and other important factors that may impact the region’s future development are highlighted in EIU’s findings and may offer some insight for those companies, including those in the payments industry, interested in investing in Latin America.”

Other principal findings of the survey include:

– The primary interest in the region is still expected to come from North America (according to 52% of respondents). Moreover, the general perception of brands of foreign banks in Latin America is positive, according to 88% of South American-based survey respondents. As a result, there is likely to be less risk of rejection from consumers in the event of foreign acquisitions.

– Brazil, Mexico and Argentina are the most attractive markets in the region. Among all survey respondents, Brazil is clearly identified as the favorite investment destination (71%), followed by Mexico (43%) and Argentina (38%). Nevertheless, executives based in North America would rather invest in Mexico (58%) than in Brazil (53%) and Argentina (24%). Meanwhile, a large proportion of West European-based executives selected Brazil as their priority (77%).

– Competition in retail banking will increase the most. Positive economic developments in the region have led to the expansion of the consumer market, which is being targeted by financial and credit institutions. According to survey respondents, more than a quarter (27%) expect the greatest increase in competition to come in retail banking, compared with 17% in investment banking, 15% in corporate banking, and 12% in consumer finance and cards.

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