June 06, 2018

From the Desk of the CEO

Gabriel Tolchinsky
Chief Executive Officer

Bladex celebrates 40 years in LatAm, US$270bn in loans disbursed

Interview with Mr. Gabriel Tolchinsky by Allan Brown of BNamericas

Published: 05/24/2019

Over the past 40 years, Latin American trade finance and economic integration bank Bladex has helped strengthen the region's foreign trade muscles - an important role it will continue to play, CEO Gabriel Tolchinsky tells BNamericas.

BNamericas: In 2019, Bladex celebrates 40 years of operations in Latin America. During this period, what role has the bank played in the region and do you foresee that its focus will evolve or change in the years to come?

Tolchinsky: Bladex started operations 40 years ago with the purpose of promoting foreign trade in Latin America. Bladex’s establishment was backed by the capital of 23 Latin American countries - a testament to the importance of foreign trade to our region.

Bladex’s performance has been extraordinary. The bank has positioned itself as a leading institution in the financing of Latin American foreign trade, disbursing more than US$270bn in loans since its establishment.

Bladex is a reference bank for the multilatinas [LatAm firms that have expanded across their respective borders into new markets], as a financial institution with a regional presence. These important milestones have been achieved with high levels of profitability, under varying macroeconomic environments, and with very low levels of historical delinquency.

Bladex is competitive in an environment of fluid local and international markets, with local, international and technologically capable participants. In that sense, we believe that the barriers that exist today for the sources of capital between various debt instruments will continue to fall. Structured in an appropriate manner, investors may not differentiate between loans, commercial invoices or other negotiable instruments if the credit risk among them is comparable. We see opportunities in the evaluation of assets for all types of foreign trade, both financial and commercial, and in the creation and development of attractive portfolios for capital markets.

When I think of Bladex’s next 40 years, I visualize an institution that commercially and operationally accompanies its clients, commercially and operationally regardless of where they are in the macroeconomic cycle.

BNamericas: What is the relationship between Bladex and other regional multilateral banks such as CAF or IDB?

Tolchinsky: Bladex has excellent relations with local Latin American banks, international banks and all multilateral organizations. Bladex specializes in financing based on the foreign trade value cycle. Generally, a complement to the financial products offered by local, international and multilateral banks. Bladex, with its two focuses - promoting foreign trade and Latin American integration - is an ideal partner to multilateral organizations for transactions related to Latin American integration, thereby promoting multilatinas.

BNamericas: If you had to anticipate what the motors for Bladex's loan portfolio will be in 2019, what sectors or types of activity would be at the top? And in what countries would they be?

Tolchinsky: Bladex in its inception financed local Latin American banks so that they, in turn, could finance foreign trade transactions. Local financial institutions, sovereign and quasi-sovereign entities continue to be an important focus of our bank. Exposure to financial institutions represents around 50% of our loan portfolio. The integrated energy sector represents around 6% while the rest of our exposure is atomized by industry, with no single sector representing more than 5% of the portfolio.

For credit considerations and our risk/benefit equation, we are constantly adjusting exposures in countries such as Argentina and Brazil. We view Chile, Peru, Panama, the rest of Central America as well as the Caribbean as growth opportunities.

BNamericas: Can you give us an idea of how you expect the bank's total loan portfolio to grow 2019?

Tolchinsky: While we do not talk about specific growth goals, we do note that, historically, there is a correlation between our growth and Latin American economic and foreign trade growth. High levels of liquidity, coupled with slow credit demand growth, in several countries, brings tighter origination margins, which impacts our perception of the risk-benefit function. To improve our profitability, we are focused on growth at reasonable margins with existing and new clients as well as controlling operating costs. Streamlining of our operations is reducing expenses and driving improvements in our efficiency ratio.

BNamericas: In February, the bank announced the successful closing of a US$131.5mn bridge loan, destined to finance an acquisition in favor of Corporación Favorita. Do you expect to see more mergers and acquisitions this year?

Tolchinsky: Absolutely. Consistent with our regional presence and our Latin American integration mandate, we will be actively participating in financing transactions that expand the presence of the multilatinas and the consolidation of the Latin American financial sector.

BNamericas: Your 2018 results were impacted, indirectly, by a deterioration in sugar fundamentals. Is there anything the bank can do to shield itself against such a scenario in the future?

Tolchinsky: Yes. The context in which foreign trade is carried out has changed. And, so has the credit risk associated with the financing of certain transactions, particularly in the agro-industry. The paradigm of 'fair trade', based on free trade agreements and a tendency to lower tariffs is, for the time being, over.  That means that foreign trade has become a political weapon. In this new context, it is not surprising that, for example, countries such as India produce sugar in order to generate employment. Although this over-production creates an imbalance in the market and brings commodity prices to levels below the marginal production cost of the most efficient countries, political considerations can prevail – with little to no consequences.

In a context of fair trade, lending to the top 25% of efficient producers was enough to protect against the volatility of the commodity. Under current conditions, it is not. Lending to production companies, we need to see integration with the markets they sell to, as well as a 'pricing power' so as not to be at the mercy of commodity market prices, as these can be significantly impacted by actors with primarily political considerations.