The dynamic energy market across the Americas
November 4, 2019The dynamic energy market across the Americas
Jim Morris, Managing Director and Head of Global Capital Markets, Latin America, explores why investors are turning to Latin America, and how Scotiabank maintains the critical interconnectivity between North American institutional investors and Latin American investments.
A highly connected global capital partner
In today’s capital markets, there continues to be significant demand for high-quality, real-yielding assets. With an approximate US$15 trillion of government bonds worldwide trading at negative yields,1 virtually all of it developed-market debt, institutional investors are increasingly looking to Latin America as an investment source through such vehicles as debt capital markets financing.
To explore the investment opportunity represented by Latin America, we touch base with Jim Morris, Managing Director and Head of Global Capital Markets, Latin America for Scotiabank. In addition to the investment opportunity, we also discuss the importance of the right global banking partner in maintaining the critical interconnectivity between North American institutional investors and Latin American investments.
Why investors are turning to Latin America
For corporate investors looking for quality, yield and diversification, Latin America represents a compelling opportunity. The economies that make up the region tend to benefit from a rapidly expanding economy with a young population and a growing middle class. At the same time, Morris notes that select economies in Latin America, such as Brazil and the Pacific Alliance nations (Chile, Colombia, Mexico and Peru) provide investment ideas that are within the risk tolerances of most corporate investors. The positive attributes of the Latin American markets in which Scotiabank tends to focus include political stability, above-average GDP growth and geographic proximity to the United States and Canada.
“What's compelling when you look at the Pacific Alliance specifically, is that you have central banks that have become very credible, especially with international and institutional investors,” says Morris. “When investors have confidence in a central bank, they have more confidence in the corresponding government. That can translate into confidence in both its currency and its bonds.”
The importance of a connected banking partner
Morris uses the term “global local,” which intuitively might seem to be a contradiction in terms, but in fact is a succinct summation of what Scotiabank offers. In fact, it is what Morris views as one of the principal defining features of an ideal corporate and investment banking partner. For a company operating in Latin America or an investor wishing to invest in the region (typically through such industries as energy, mining and infrastructure), a successful global banking partner needs to be truly connected, according to Morris. That means on-the-ground operations in Latin American markets themselves and in centres of global investment capital (e.g., New York, Toronto). Varying levels of demonstrated long-term commitment to Latin American markets is a key differentiating factor between institutions offering global corporate and investing services, he says.
“Markets have stress cycles, and players get in, but few have true stamina,” Morris explains. “If you look at Latin America, it's littered with big global competitors who jumped into the region with a very big footprint at the first sign of a slowdown, locally or in the global economy. Some of these players have scaled back or, in some cases, exited the region altogether.”
Morris has also observed that corporate banking clients and investors alike are increasingly looking for truly committed banking partners whose long-standing presences in Latin American markets give them the expertise to advise on increasingly complex and global deal structures and on company growth strategies.
Latin American leadership is in Scotiabank’s DNA
It is these principles that help drive Morris’s nuanced approach to servicing clients in Latin American investment markets. His team is able to effectively partner with Latin American businesses seeking to raise funds and institutional investors seeking high-quality opportunities in the region. Scotiabank’s own history, as a bank founded in Canada but with operations in the United States and Latin America dating back more than 100 years, places it in the unique position of being a trusted bank for the Americas region as a whole.
As opposed to other global banks whose presence in Latin America fluctuates with market and macroeconomic movements, Morris points out Scotiabank’s bottom-line commitment to the region: approximately 30% of its total revenue comes from its Pacific Alliance operations, and the Bank’s approximately 35,000 employees across Latin America further underscore the company’s long-term commitment to that fast-growing region. As a “Big Five” Canadian bank with extensive global operations, Scotiabank is able to leverage its strong fundamentals to provide competitive pricing on liquidity for corporate transactions while drawing from the resources of a worldwide network of specialists in financial transactions and specific sectors and industries (e.g., commodities).
“Our presence in Latin America is effectively part of our DNA or our makeup. When we're bringing opportunities to our clients, we deliver both the strength of our global franchise and the intimacy of having been a local bank in region for a very long time,” says Morris. “It serves our clients well, and is also an indication of our dedication to Latin America. We have built up our presence across the Americas, and we still continue to strengthen these bonds every day.”
For more information about Scotiabank’s capital markets solutions, please contact:
Managing Director and Head, Global Capital Markets, Latin America
1. Bloomberg, Bloomberg Barclays Global Aggregate Negative Yield Debt Index, as of September 2019.