lost billions in loans in the 1980s, U.S. banks are cautiously rebuilding their links with Latin America. With the exception of Citicorp and Bank of Boston Corp., these banks remain reluctant to go beyond short-term lending, much of it trade-related. Those that do go further have mostly focused on investment banking and capital markets-related operations, such as trading and underwriting. "Latin America is a good example of a market where the short-term management strategy of American banks really shows up," said Lawrence Cohn, a banking analyst with PaineWebber Inc. in New York. Fifteen years ago, a fair number of U.S. banks had reasonably strong networks across Latin America. But "none of them stuck with their customers through hard times and now that these countries have a possibility for showing substantial growth, there's hardly anyone left," Mr. Cohn said. Still, some U.S. banks are back again. They include Bankers Trust New York Corp., Chemical Banking Corp., Chase Manhattan Corp., and J.P. Morgan & Co. Chase, for example, had as many as 47 branches in Brazil only 10 years ago. Today it retains only one wholesale banking branch there. Efforts to reenter the market have also been frustrated by tough local restrictions on foreign entry into the banking system. Banks have focused most of their effort on Mexico, where U.S. banks obtained the right to open separately capitalized subsidiaries under the North American Free Trade Act. Banks taking advantage of this new opportunity include American Express Bank Ltd., Bank of America, Bank of Boston, Chase Manhattan, Chemical Bank, Citicorp, First Chicago Corp., J.P. Morgan, NationsBank, Republic New York Corp., and Laredo, Tex.-based International Bancshares. In addition, Bankers Trust New York Corp. has sought authorization to open a brokerage company. In countries outside Mexico, forays by American banks have been much more selective and mainly confined to underwriting international debt and equity offerings for Latin corporations, acquiring speculative investment stakes in Latin companies, and expanding risk management and trading in local capital markets. More recently, some banks are also setting up special Latin investment funds for U.S. investors. Bankers say that makes a lot more sense than trying to go up against well-entrenched local retail banks with extensive networks. "Trying to come into a retail market and competing with giants that have over 1,000 branches is pretty difficult," said Randolph L. Freiberg, managing director of Bankers Trust Co. in Sao Paulo. Like other big money-center banks, Bankers Trust believes it can accomplish more by focusing on complex, specialized transactions. As part of this strategy, the bank earlier this year set up a joint investment banking subsidiary, Itau Bankers Trust Banco de Investimento SA, to develop corporate finance, proprietary investments, debt and equity trading, and underwriting. By far the two most active U.S. banks in Latin America continue to be Citicorp and Bank of Boston. Both are expanding their retail and wholesale operations, which have until now catered mainly to wealthy individuals and better-rated companies. Bank of Boston is expanding in both Argentina, where it recently acquired 93 branches, and in Brazil, where it plans to open 10 to 15 additional offices in the next two years. Citicorp, also looking to expand, recently put in a bid to acquire Banco Federal Argentino. "It's not that we didn't think retail wasn't attractive, but with only 26 branches, pursuing a broader retail strategy didn't make sense," says Enrique de Campos Meirelles, country head for Bank of Boston in Brazil. The key attractions of Latin America, like any other emerging market, are rapid economic growth and extremely high interest rates. Even in Brazil, where a recession is now under way, growth in the gross national product is expected to reach 5% this year and demand for credit remains enormous. That means that local as well as foreign banks can borrow money at relatively low interest rates on international markets and then lend, in local currency, to local borrowers at considerable markups. Bankers across Latin America acknowledge that spreads of anywhere from 300 to 600 basis points over their borrowing costs are the norm rather than the exception. "Industrial productivity is growing at a rate of 10% a year in Argentina and companies are investing heavily," observes Manuel Sacerdote, country head for Bank of Boston in Buenos Aires. "There's a big demand for capital and investments in the corporate sector and equally strong demand for credit in the retail sector in areas like mortgages and credit cards." These kinds of opportunities and profits have been particularly attractive to Citicorp, which has a long-standing presence in many Latin countries and which announced earlier this year it will make a major push into consumer banking. Just how profitable Latin America can be is obvious from some key Citicorp figures: At yearend, the bank had only 10% of its total assets of $261 billion in Latin America, but its operations there accounted for nearly 13% of its total revenues of $16.7 billion, and 20% of its total net income of $3.4 billion.

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