Market Insights

As the pandemic gradually retreats in many parts of the world, Scotiabank is showing how its connectivity across Latin America’s Pacific Alliance nations has helped clients refocus on growth. Now, the Canadian-based bank is charting the future of connectivity, to help corporate, commercial and institutional clients realize the region’s vast, long-term potential.

“Although the pandemic is having severe impacts in Latin America, we’ve seen great resiliency in the Pacific Alliance countries, where governments responded rapidly with public health controls and economic measures, and companies managed the conditions well,” observes Robert Williams, Senior Vice President, International Corporate and Commercial Banking, Scotiabank.

He refers to the Pacific Alliance bloc comprised of Chile, Colombia, Mexico and Peru, formed in 2011 to drive integration among these high-growth nations. “And, Scotiabank’s long-established connectivity strategy is helping clients re-emerge amid promising growth projections.”

While few would doubt that the Pacific Alliance countries would rebound, at some point, from the pandemic tumult, one might be surprised by the speed of their economic recovery. With a combined population of 225 million and pre-pandemic regional GDP of C$2.7 trillion1, the four nations represented 50% of the continent’s trade2 and 38% of foreign direct investment3. These factors, along with swift actions by authorities in Chile, Colombia and Peru to introduce public health controls, economic supports, and monetary and currency policy adjustments, have helped accelerate the economic revival among Pacific Alliance nations.

Scotiabank Economics forecasted 6% GDP growth in Chile during 20214 – up from negative 6% in 2020 – which represents a remarkable turn-around, considering the Andean country’s widespread social unrest in 2019, the pandemic of 2020, and the upcoming Constitutional reform. “This rebound goes back to these countries’ strong fundamentals,” explains Williams. “Going into the pandemic, they had healthy debt-to-GDP ratios, which gave them the maneuverability to access debt and deliver critical support programs for people and business. Chile has had great success with vaccination distribution and their central bank carefully managed interest rates to create a strong investment climate.”

Similar growth projections have been published for Peru, with anticipated 8.7% GDP growth in 20215,  Colombia, with 5.0% GDP growth expected in 20216, and Mexico, with forecasted GDP growth of 4.9% in 20217.

“Our outlook reflects the region’s underlying growth potential, in terms of both its strong economic foundations and current trends that position it for a nice recovery, from rising commodity prices and renewed trade with the U.S. and Asia, to sizable infrastructure build-out opportunities,” explains Williams. “This region affords a tremendous amount of torque, as these economies emerge from the pandemic.”

Pacific Alliance companies refocus on growth

While acknowledging that Scotiabank experienced a natural drop in its transaction pipeline during the pandemic peak, Williams points out that the Bank is now nearing its pre-COVID-19 business levels, as clients seek a range of new financing solutions, from corporate lending, to M&A, to local or international debt and equity capital. 
 

“We’ve seen how companies quickly adjusted to the pandemic, whether by going digital or finding alternate ways to distribute their products,” describes Williams. “Although some industries are more impacted than others, a number of sectors have done well, including power and utilities, with rising demand for green energy development, and technology companies investing in larger server farms to support remote work demands. The oil and gas and mining industries also adapted and reopened quickly, enabling them to benefit from improving commodity prices.”

Williams praises the region’s most resilient companies, including investment grade multinationals or Multi-Latina firms that are diversified across Pacific Alliance countries, that performed liability management activities, adjusted their balance sheets and repaid existing debt, providing them with the ‘muscle’ to access new financing and pursue renewed growth in early 2021.

“These companies have benefited from our unique connectivity across the Pacific Alliance,” notes Williams, alluding to Scotiabank’s long history in Latin America, including a full range of local and cross-border advisory and product offerings to corporate, commercial and institutional clients. “They see that we know their company and their strategy well in their home country, and we can connect them with our wholesale banking team in their target country, for complete, holistic solutions. And, through their deep relationship with the Bank, we provide them with reliability and consistency in our proposals, structures and terms in each market.”

Connecting across borders to support client ambitions

Recent transactions highlight Scotiabank’s unique cross-border capabilities, including EnfraGen’s US$1.76 billion bank and bond deal in which Scotiabank served as Global Coordinator, Joint Bookrunner and Joint Lead Arranger for the independent power producer with operations across Latin American countries. In fact, the transaction was awarded ‘2020 Latam Power Deal of the Year’ by Project Finance International (PFI), who praised the US$710 million debut bond issue and US$725 million, five-year bank loan in terms of, “The size and the complexity of this deal, the various geographies and the two markets of execution, made this the region’s best power finance deal in 2020.8
 

Scotiabank also stood out for the one-stop advisory solution it provided when Cubico Sustainable Investments, a leader and global investor in renewable energy, entered the transmission lines market in Colombia through the creation of Caoba Inversiones. Serving as the Structuring Bank, Joint Bookrunner, Lead Arranger, Sole Hedge Provider, Exchange Agent, Administrative, Collateral, Trust and Intercreditor Agent, Scotiabank supported this US$340 million, multi-currency, three-tranche transaction – which was the first structured financing for a transmission line portfolio in Colombia – and Cubico’s 49% purchase of Caoba Inversiones from power developer Celsia Colombia. Scotiabank met the sponsor’s complex requirements for flexible financing and bespoke currency and hedging solutions, with its ability to connect transaction parties in North and South America and Europe.

Building the future of connectivity

Despite the bullish Pacific Alliance projections, Scotiabank refuses to coast on its current momentum. Instead, the Bank is now focused on transforming the way it delivers cross-border connectivity to clients.

“Over the past decade, we’ve come a great distance, from being seen as primarily a lender to becoming recognized as a complete wholesale banking platform that can offer multiple products across the spectrum and connect clients with our people on the ground across the Pacific Alliance countries, the Americas, and beyond,” explains Williams. “Now, we are designing the evolution of this connectivity, including seamless, digital transactional banking across borders, to bring clients a higher level of access, insight and efficiency.”

Scotiabank is investing in technology to introduce digital cash management and payment services to Pacific Alliance clients, with seamless online access, functionality and user experience across each market. In tandem, over the next several years, Scotiabank’s ‘Conectado’ initiative will digitally transform the end-to-end client lifecycle, from needs identification and onboarding, through to credit adjudication, product fulfilment and ongoing monitoring. The program is transforming the data capture capabilities, by transitioning from siloed, product-centric systems to a client-centric model. The ‘Conectado’ platform acts as the bridge that connects the legacy platforms and consolidates all client information at a single source, for smoother access and service delivery.  

“Across business and financial services, we all recognize that if you are not digital in the next few years, it will considerably hinder your ability to grow,” remarks Williams. “Our clients seek greater access to their financial data, and tools to help them operate more efficiently and productively. That way, they can dedicate more time to high value, strategic tasks, rather than spending hours reconciling accounts across multiple banks or countries where they operate.” 

For example, imagine the treasury team of a Colombian-based multinational being able to easily consolidate all of their transaction and account information across their subsidiaries in Peru and Mexico, through a single sign-on, multi-currency platform, enabling instant reconciliation for their balance sheet and timely data for business decision-making.

“By investing in the future of connectivity, we’ll give our wholesale banking clients the most efficient way to view their overall financial wellbeing, and be their bank of choice because we provide the best digital experience, and the strategic data they need in a prompt, accurate manner,” Williams points out.

Reflecting on Scotiabank’s current and future connectivity, Williams notes, “Our unique connectivity has proven critical to Pacific Alliance clients, in times of uncertainty or growth, by bringing them steady, predictable and comprehensive solutions across borders. Now, we’re moving forward to provide seamless, digital connectivity to help clients see, and seize, the opportunities before them.”

For more information about Scotiabank’s Wholesale Banking solutions and opportunities across the Americas, please contact:

Robert Williams
CEO, Costa Rica and Senior Vice President, Central America

Phone: 416-863-7232