Sales and Trading
A highly connected global capital partner
November 12, 2019A highly connected global capital partner
Michael Kruse, Managing Director and Head, Global Banking and Markets, U.S., shares insights into how the United States has become a key connector between other markets and Latin America, highlighting Scotiabank’s comprehensive approach to providing solutions across borders.
The United States as a bridge to Latin American investments
Private equity and other institutional investors are increasingly looking to Latin America as a source of returns. The reasons for this include the region’s emerging-market characteristics, investor-friendly environments, and opportunities in commodities and infrastructure. Connectivity between regional markets is key, and the United States has become a critical hub through which investment capital to Latin America travels. Michael Kruse, CEO, GBM U.S., provides insights into how the United States has become the connector between other markets and Latin America. Furthermore, Kruse details what a corporate and investment banking client should look for in a banking partner.
The role of the United States as a conduit through which investment capital travels to Latin America is in part based on its more well-known characteristics. These include its proximity to Latin America, the status of the U.S. dollar as a reserve currency and the volume of investment capital based in New York City. However, Kruse notes that the increasingly global nature of the private equity and broader institutional investment market has also underscored the importance of the United States as a portal to high-growth opportunities further south. Large investors outside the United States are looking for investment ideas beyond the somewhat saturated traditional developed markets, and are leveraging their existing U.S. operations to facilitate those transactions, in turn utilizing the services and expertise of global banking partners with on-the-ground resources in both the United States and Latin America.
“There is currently a tremendous variation in how private equity funds and other investment vehicles are structured,” says Kruse. “If you look at some of the big investors in Asia, they have their corporate headquarters, but then they have an investment office in New York and, in some cases, Mexico, Colombia or Brazil. But the lynchpin that ties it all together is typically the United States, because of the access to capital, and New York’s position as a hub for global investment activity.”
Dynamics of the Latin American market
From his position heading Scotiabank’s U.S. operations, Kruse has observed the evolution of how institutional investors have approached Latin American markets, in particular the fundamentally strong and fast-growing nations in Scotiabank’s Pacific Alliance ¬– Mexico, Peru, Chile and Colombia – and Brazil as well. While these economies are traditionally known for certain sectors, such as energy, mining and infrastructure, Kruse is seeing increased opportunities for investments in health care, technology, consumer and retail. Moreover, these emerging opportunities are not as sharply delineated as they have been in the past.
“We often speak of convergence and connectivity across the Americas, but we’re seeing increasing convergence between sectors as well,” notes Kruse. “For example, in oil and gas we’re seeing a tremendous amount of technological innovation. Analytics, artificial intelligence and big data are key themes in oil and gas just like they are in Silicon Valley. So, the lines between sectors are blurring.”
Key characteristics of effective U.S., global banking partners
If connectivity between Latin America, the United States and the private equity and institutional market is critical to success, what should investment and corporate banking clients look for in a banking partner? Kruse frames the issue in both vertical and horizontal terms. The vertical is the necessary ground-level experience in both the specific Latin American markets and the major global centres of capital.
As for the horizontal, a banking partner must be able to connect the dots across Latin American markets and its various lines of business themselves, says Kruse. Many companies operating in Latin America have interests in multiple markets in the region, and a global banking partner should have resources that match those of their clients. Furthermore, with the aforementioned convergence between sectors and industries, a network of analyst and research teams specialized in each of those spaces, but integrated with one other, is another important differentiator between investment banks.
“If you're funding a transaction in Peru, it is much more complex than funding a transaction in the United States or United Kingdom, or any of the other traditional developed markets,” Kruse explains. “Having a global banking partner that can help you navigate the flow of capital from region to region with proven expertise is essential to a successful deal.”
This framework Kruse outlines is reflected in Scotiabank’s broad Latin American corporate and investment banking and capital markets services. The Bank, founded in Canada, has a commitment to Latin American and U.S. markets dating back 100 years. To this day, Scotiabank maintains the vital connections between its capital markets operations in New York City, region- and sector-specific sector specialists (e.g., a team of energy analysts in Houston, Texas) and its 35,000+ employees in Latin America, ensuring a truly global and seamless client experience in the corporate and investment banking space.
“With our robust operations in New York and other key U.S. markets, we have the benefit of being the link that connects Latin American opportunities to investment capital,” says Kruse.
“Between Latin America, the United States and Canada, Scotiabank is positioned as the ‘bank of the Americas,’ and we support this by ensuring we have expertise across all these regions.”
For more information about Scotiabank’s business in the U.S. and beyond, please contact:
Managing Director and Head, Global Banking and Markets, U.S.