Credit card companies are turning their sights on Latin America, now that Mexico's economy is on the mend.

While the interest has not translated into a great deal of border crossing, the handful of American companies that have taken such steps say that their peers and customers are beginning to inquire about market conditions and opportunities in the region.

The curiosity is driven, in part, by the recent changes brought about by free trade agreements that have eliminated many barriers.

It appears that one of the strongest opportunities for foreign penetration in Latin America is in new technology.

In fact, Latin America may soon have more advanced systems and products than the United States, as chip and stored-value cards, new automated teller machines, and state-of-the-art credit bureaus are aggressively test- marketed and implemented in various countries.

"These new markets will be able to leap-frog," established American systems and products, said James F. Partridge, president of Visa International Latin America and Caribbean Region, "because they don't have the infrastructure that exists in a more mature market."

Last month, Visa's regional Latin American annual meeting in Cancun, Mexico, focused almost exclusively on showcasing new technology.

And a Visa official conceded that the San Francisco-based association has more pilot programs scheduled in Latin America than in any other region.

Both Visa International and MasterCard International are preparing to launch several smart card tests in the most advanced markets, Brazil, Mexico, Argentina, and Colombia. Visa said that it will test two stored value cards in Argentina and Colombia beginning in November. In Mexico, Visa will expand a test of a debit card with Banco Confia that has both magnetic stripe and chip functions. The chip is linked to an investment account like mutual funds and certificates of deposit.

Nearly 85% of MasterCard's sales volume in the region comes from spending in Brazil, Argentina, and Mexico, while Visa said that about the same percentage of its spending in the region is from those countries and from Venezuela and Peru.

So far, embattled Mexico has been the focus of most of the attention in Latin America. But in recent months, as Mexico has steadily improved, its neighbors have also strengthened. In fact, Brazil is now the hottest market in terms of consumer sales growth.

"Mexico was unseated recently," said Day Jimenez, Visa's vice president of business development for Latin America.

"Sales volume is growing at 50% to 60% a month in Brazil," said Richard N. Child, MasterCard's general manager for Latin America and the Caribbean. "While we have not shifted our focus from Mexico to Brazil, we have further increased our resources in Brazil."

Cardholder sales volume in Brazil for both associations is nearly $2 billion, with MasterCard reporting the highest increase, 1,300%, in the first quarter of this year from the same period last year.

Brazil's government implemented an economic plan that lowered inflation to about 3% from 50% a year ago as well as tightened credit, according to Salomon Brothers Inc. analyst Jose Garcia.

Still, even with such encouraging growth, there are a number of dramatic differences between the American and Latin American markets. "Generally speaking, outsiders are not welcome," said Mr. Partridge.

Indeed, only a handful of American banks and vendors have ventured beyond Mexico, which has attracted such players as Household International, Banc One Corp., First Data Resources Inc., Citicorp, American Express Co., and the three major credit bureaus: Trans Union Corp., Equifax Inc., and TRW Information Systems and Services.

Citibank has five million cards in Argentina, Brazil, Colombia, Mexico, and Puerto Rico. Bank of Boston, which sold its U.S. credit card portfolio in 1989 to Chase Manhattan Bank and is preparing to get back in the business in the United States, has been active in Latin America under the name Banco de Boston for 60 years, offering full retail services in Argentina, Brazil, Uruguay, and Chile.

In Brazil the Boston bank is offering the General Motors credit card and in Argentina it is issuing the United Airlines card. Household International, which issues the GM card in the United States, said it didn't pursue a partnership in Argentina and that other banks issue the GM card in Canada and Australia.

Equifax, too, has made inroads in Argentina, where it has a joint venture with an association of banks offering credit bureau services. The Atlanta-based bureau also has a 25% ownership stake in Dicom SA, a Chilean information services company as well an affiliation with a credit bureau in Colombia through its stake in Dicom.

The number of U.S.-based card companies in Latin America are few, and not limited to the above examples, but officials from TRW and Equifax say that their U.S. customers are requesting information about the credit environment there.

Ned Manashil, TRW's international vice president, said that since the company launched Datacredit, its credit bureau in Guadalajara, TRW's U.S. customers, including card issuers, are expressing "tremendous interest" in TRW's expansion plans in the region.

TRW's state-of-the art facility in Mexico is more advanced than its system in the United States, which is based on 25-year-old technology.

"We have had people from other countries tour Datacredit, which we see as our demo site," said Mr. Manashil.

Equifax has a different approach from TRW.

William R. Phinney, vice president of South America, Equifax, said, "We are not using these countries to launch new technology, but rather we are bringing our (current) technology to them."

TRW is also considering partnering in Chile, Argentina, and Brazil to offer credit information services.

Perhaps one of the biggest challenges facing lenders in Latin America is obtaining reliable credit information.

While most countries offer some form of credit bureau service, such operations are limited primarily to negative data, are more expensive than their American counterparts, and require more time to deliver the information.

Mr. Manashil believes that it is not uncommon for a lender in Latin America to pay up to $50 for one consumer credit report and wait one day and one month to receive it. By comparison, lenders in the United States pay less than $2 for reports and receive them within seconds.

While many of Equifax's customers are interested in penetrating Latin America, Mr. Phinney believes that some lenders have a "wait-and-see attitude" to evaluate the region's economic condition before plunging in.

Executives who are entrenched in the markets there caution foreign companies about the cultural and legislative differences they will face in establishing operations in Latin America.

Generally, most of the countries are dominated by a few major players that control most of the market share in their industries, but that may change as the various governments continue to privatize most of the state- run conglomerates.

There are substantial infrastructure problems throughout the region, such as poor telecommunication and postal systems.

At the same time, however, such business challenges are often met with creativity.

For example, some Colombians circumvent shoddy mail delivery by paying their utility bills at grocery stores using a debit card at the point of sale. In Mexico most banks deliver new credit cards by messenger.

Brazil presents another example of ingenuity. As part of the government's economic plan, a new regulation aimed at curbing consumer spending prevents Brazilian banks from extending revolving credit. All card purchases must be paid in full each month. But the regulation only affects banks, so merchants may extend a line of credit that is indirectly offered through banks to customers who want to finance big-ticket expenditures.

In April the Brazilian government also limited a popular practice of post-dating personal checks to pay for items over a period of time.

Checks are widely used in Brazil. Even taxi drivers are paid by check.

As Brazil shakes off its economic troubles, Argentina, which was more profoundly affected by Mexico's economic crisis, is still under water. It is suffering from an 18.6% unemployment rate, and like most Mexican banks, Argentine lenders are not issuing new credit, according to Mr. Garcia.

Mr. Garcia believes that consumer consumption in Argentina will remain weak this year but shoot up again next year.

By contrast, Chile "is an amazing story of a free-market economy," said Mr. Phinney.

Inflation is under 7% and the use of credit is prevalent. There are six million credit cards in circulation in Chile, which has a population of 14 million. Only 1.5 million of those cards are issued by banks, though, and the rest are private-label cards.

Michele Turkel, a consultant with Spectrum International, Scarsdale, N.Y., who is working with a number of financial institutions in Latin America to establish cobranded card programs, observed that the negotiating process between corporate partners is typically less adversarial and quicker than in the United States.

"They seem to be able to cut through the corporate bureaucracy that exists here," she said. "There is more trust in partnerships."

A recent deal Ms. Turkel worked on in Mexico involving Aeromexico and Banco Serfin was completed in 90 days, whereas the same process in the United States could take six months to a year, she said.

Ms. Turkel also pointed out that most joint ventures in Latin America occur between two partners that have had a prior relationship.

Robert K. Hammer, a consultant based in Newberry Park, Calif., who is also working with a number of Latin American financial institutions, believes that credit scoring companies, credit bureaus, data processing, and account software companies interested in the region, "all stand to benefit from the exploding consumer marketplace."

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