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A G E N T
Santander
Two years ago, Santander acquired the Citi retail portfolio here.
The reliable average scores offered by a small number of foreign
clients are correspondingly ordinary in all areas save the human
side – those for client service and relationship management
clear the local averages – and will be hard to shift until the MSCI
reclassification takes effect.
Caja de Valores
The Argentine central securities depository (CSD), which
holds debt as well as equity securities, is at the heart of official
efforts to revitalise the local capital markets. The CSD, which
has SWIFT-compliant links to other CSDs in Europe and North
America, has attracted a response from a foreign provider with
clients interested in Argentine debt. The average scores indicate
room for improvement.
COSTA RICA
The deterioration of the fiscal position of the government,
which led to successive downgrades by rating agencies in 2014,
2016 and 2017, initially attracted foreign capital eager to collect
bond yields that rose to some of the highest in the region. Now,
with the long-term debt rating having turned negative, inves-
tors are concerned that the government debt is so large it will
undermine private sector activity and destabilise the economy.
After the end of the bull run, the market fell precipitously as
high and rapidly growing levels of government borrowing sank
the sovereign credit rating below investment grade. This reflect-
ed the near-complete domination of the market by government
bonds rather than equities, and the attraction of relatively high
yields to speculative money flows. Fixing the budget deficit
requires wrenching reforms of public spending – particularly on
the remuneration of civil servants – and tax administration in a
country where bureaucracy is suffocating and tax evasion wide-
spread. The necessary reforms have yet to make much political
progress. A private sector largely dependent on exporting tour-
ism, pineapples and bananas has also suffered from sustained
mismanagement of the exchange rate – the colon had a crawling
peg to the US dollar which gave way to a banded float – leading
to an over-valuation of the currency that made sales difficult for
exporters.
Banco BCT
The privately owned BCT is the bank most international net-
work managers favour here. It is not assessed by many clients
this year or on many of the services it provides but, in those
areas where the product is measured, only relationship manage-
ment falls badly short. The lack of responses is scarcely surpris-
ing, given the recent history of the market.
Banco Nacional de Costa Rica
The state-owned bank did not attract enough responses to be
rated. This reflects the end of the bull run that the Costa Rican
market enjoyed in the five years to 2017.
B A N K S
I N
F R O N T I E R
M A R K E T S ]
PANAMA
Nine years ago, the Panamanian economy was in the early stages
of an economic boom that has turned it into one of the fastest
growing economies in the world over the last decade, driven
by its trade and shipping sectors, mining industry and massive
infrastructural investment, with the associated construction
boom. Growth was more subdued last year. This helps explain
why the performance of the Panama General Stock Exchange
Index (BVPSI), although it also reflects listings for companies
throughout the region, looks better from a ten-year perspective
than on a 12-month view.
Citi
Citi extended its direct custody and clearing market to Panama
City in 2011, with additional capacity supplied from its regional
service centre in Tampa. It looks after a number of major banks
here and turns in a robust performance. A collection of excellent
scores (see page 80) is deflated by a lack of client conviction in
areas where Citi would ordinarily expect to shine, such as settle-
ment and technology. Respondents would also like lower prices.
VENEZUELA
The Bolsa de Caracas is of interest chiefly as a reminder of the
perils of investing in frontier markets. Last year, it lost the whole
of its value. On the charts, the IBC Index simply drops vertically
at the end of last year. It is a performance which makes the stock
market an unusually accurate proxy for the state of the Venezue-
lan economy, which shrank by 17% in 2017 and presumably even
more last year. After all, this is a sanctioned country suffering
hyper-inflation, which is on the cusp of total economic, financial
and political collapse.
Banco Venezolano de Crédito
As recently as the 2017 survey, Banco Venezolano de Crédito
was competing with Citi to be the best sub-custodian in Caracas.
Now the bank cannot even be found on the Internet. Yet it has
attracted a response, which records that the client service and
relationship management are very good, the asset safety satisfac-
tory only, and that there is ample room for improvement in the
management of cash, currency, credit and collateral.
Spring 2019
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