MIAMI - Latin America has not fully emerged from its deep recession of recent years, but profits of U.S. banks operating there have been booming, and that is encouraging U.S. expansion in the region.
"We're having record earnings in Latin America in 1999, and we expected record earnings in 2000," said Henrique de Campos Meirelles, president, global bank, FleetBoston Corp. Mr. Meirelles was among 1,300 bankers from 19 countries who attended the 33d annual meeting of the Federation of Latin American Banks here last week, more than twice the number at last year's conference in Panama.
Chase Manhattan Corp.'s Brazilian affiliate is among those with surging profits. In the first half it earned a 200% return on equity, while Citigroup Inc.'s hit 92%.
U.S. banks' new investments are varied.
Bank of America Corp. this month entered into an agreement with Bradesco, a Brazilian bank, to jointly process corporate credit card billings in Brazil.
Chase is seeking to arrange a $1 billion, 18-month loan for Grupo Mexico, an industrial conglomerate, and this month privately placed $150 million of two-year bonds for Banamex, Mexico's biggest bank.
Bank of America says it is putting more emphasis on investment banking. "We are refocusing on what we do, but we remain committed to building up business in Latin America," said Federico Sacasa, managing director and head of corporate banking for Latin America at Bank of America Corp.
Megamergers in the United States are also stimulating U.S. bank investment in Latin America.
The plan at the companies, now combined as FleetBoston, is to expand activities in Latin America because the Latin exposure is substantially less on a percentage basis than it was before the merger.
Even smaller U.S. banks are getting into the act. Union Planters Corp. of Memphis recently bought five Florida banks actively engaged in Latin American banking.
"Union Planters never had much of an international focus, but our acquisitions took us into Latin America and gave the banks we acquired much more leverage to expand," said Abigail Martinez, a structured-finance officer at Union Planters.
Some bankers attribute rising enthusiasm about Latin America to the follow-your-customer doctrine. "U.S. companies are investing heavily in the region and they need banking services," said George Doolittle, managing director at First Union Corp.
First Union is trying to develop broader relations with local Latin American banks in a strategy to bolster its trade finance, cash management, funds transfers, and securitization transactions.
U.S. bankers cite improvement in the Latin American economies as a key reason for expanding there. According to a forecast by J.P. Morgan & Co., Latin America's gross domestic product will grow 3.6% next year, following an expected 0.3% decline in 1999.
And they expect the regional economy to grow more than 4% in 2001. That includes 3% growth in Argentina and Brazil, 6% in Chile, 3% in Colombia, and more than 4% in Mexico.
Other factors spurring bankers' interest in Latin America include ongoing deregulation. Mexico, for example, is contemplating allowing U.S. banks to branch directly across the border. Bankers said that it will allow them to expand in that country at a far lower cost by eliminating the need to operate through separately capitalized subsidiaries with limited ability to lend.
Growing use of equity financing, as well as numerous programs to privatize government-owned corporations also are encouraging U.S. banks to expand their capital market activities.
U.S. officials and bankers say the size and strength of U.S. banks gives them a substantial advantage in operating in the volatile Latin economies. Latin Americans want to deal with banks with deep pockets.
Also, decades of experience in Latin America gives U.S. banks a head start over French, German, Spanish, and English banks, most of which only now are entering the market. U.S. banks have the further advantage of operating out of the biggest and most liquid capital market in the world.
The bankers also noted that large trade and investment flows between Latin American and the United States give them an additional advantage.
"We now have hundreds of branches across Florida alone and Florida is a lynchpin for banking with Latin America," Mr. Doolittle said.
In light of congressional hearings that have criticized banks for dealing with money launderers and other unsavory characters in their foreign operations, U.S. bankers attending the conference emphasized that, along with their expansion, they are becoming more careful in choosing their business partners.