Foreign trade lending tightens
New rules raise the risk factor for international trade lending.
Florida bankers are worried that new rules requiring banks to set aside more reserves to cover trade financing will slow the flow of exports from Florida. The rules, known as Basel III, are likely to raise funding costs on trade loans and may also reduce banks’ willingness to make the loans.
At this year’s Latin American Conference on Foreign Trade, Florida Trend spoke with John Rodriguez, a past president of the Florida International Bankers Association, a current member of its foreign trade committee and its representative to the Miami- Dade International Trade Consortium. Rodriguez on …
> Trade financing’s importance to Florida’s economy: “When you look at commercial lending activities, you find that here in Florida, a lot of it includes export risk mitigation; it includes export insurance, utilization of export credit agencies. Many countries in Latin America still require letters of credit and risk mitigation.”
> View that trade financing is riskier these days: “When you look at the history of trade, it has been a fairly safe form of financing. There’s a very low percentage of loss history in this particular type of financing. (But in the new rules) trade has not been distinguished necessarily as a low-risk proposition by the regulators. Trade is being treated the same as an unsecured loan, when really you’re supporting an underlying transaction with an origination and payment source. … Banks have tried to make a case that because trade has been a safer form of transacting, it has had lower capital allocations for risk in the past.”
> Potential consequences of classifying trade financing as riskier: “When you treat trade as the same level as a working capital-type transaction, then the capital allocation is higher. I think it’s going to increase the cost of doing trade finance. It’s already happening. … That cost may not be able to be absorbed, and it has to be passed onto the exporter. Not all customers can absorb the increased cost.”
> What FIBA is doing to help banks and exporters: “We’re working very actively with the Bankers Association for Finance and Trade, which has taken a lead role to work with the International Chamber of Commerce … to create awareness that trade financing needs to be differentiated.… As an industry, we are trying to distinguish the fact that banks have done a very good job in this area, and we should make a case for continuing to do trade with lesser capital allocation costs.”
> Concern that a lot of banks may get out of trade financing: “For banks, even though we might face those challenges, we do feel that we have to stay engaged in this business. It’s important to our local economy.”
ARGENTINA — Argentina came to an agreement with the Paris Club — a group of 19 creditor nations — that will settle $9.7 billion in outstanding debt that Argentina has owed since it defaulted on its debt 13 years ago. The Argentine government will pay back the debt during the next five to seven years at an interest rate of 3.8% or lower.
CHINA — Carnival will increase its China-based ships to four next year — more than any other non-domestic cruise line.
COLOMBIA — Law firm Holland & Knight expanded in Bogotá, Colombia, when it absorbed 13 attorneys from Suárez Zapata Partners. The new attorneys specialize in energy, particularly the oil and gas industry. Holland & Knight has had an office in the city since 2012; the firm says it is one of only three U.S.-based firms with offces in Colombia.
CUBA — Cuba’s diplomatic mission in Washington, D.C., is once again issuing visas, renewing Cuban passports and performing other consular services; the services had been suspended since February, when the mission’s bank shut down the accounts it used to collect fees for such services. Fees must currently be paid in cash. > Former Florida Sen. Bob Graham and environmentalists are lobbying to change U.S. trade embargo laws so that the Cuban government can buy advanced oil-drilling safety equipment from U.S. sources. Environmentalists are concerned about the threat that oil spills could pose to Florida and other states when Cuba begins drilling in the Florida Straits. > Island Travel and Tours has ended its charter service between Cuba and Tampa, citing a saturated market and lack of demand for its fights. The Tampa company Will continue to sell tickets for charters to Cuba from Miami and other U.S. cities.
EUROPE — Skin care and body contouring products maker It Works! Global, a direct-sales company based in Bradenton, expanded in Europe, beginning sales in Denmark, Finland, Germany, Spain, Norway and Switzerland. The company, which is now in 18 countries, also recently added a manufacturing facility in Australia and plans to add another European warehouse. > Orlando- based SchenkelShultz Architecture is designing four schools for U.S. Army and Air Force bases in Germany under a U.S. Department of Defense contract that also has the firm beginning work on schools in other European nations. Miami-based Opko Health is opening a global supply chain operation in Ireland, which will also serve as a holding company for several of Opko’s international subsidiaries. > Kitchen Prospect, a France-based kitchen, bathroom and closet designer and builder, will enter the U. S. market when it opens a showroom in Miami.
GUATEMALA — C3 CustomerContact- Channels is opening a second call center in Guatemala City, Guatemala, with 500 employees. The Plantation-based company, which employs 300 at its original Guatemala call center, also has international centers in the Philippines, Bulgaria, Scotland, China and India.
INDIA — In May, businesses gathered in Miami for a summit on U.S.-India trade and investment, sponsored by the Confederation of Indian Industry, Indo- American Market Gateway, Enterprise Florida and the South Florida Indian-U.S. Chamber of Commerce.
JAPAN — Japanese pharmaceutical firm Daiichi Sankyo is providing funding and other assistance in a partnership with Lake Nona-based Sanford-Burnham Medical Research Institute. The nonprofit and the pharmaceutical company will work to develop medications to fight cardiovascular-metabolic disease over the three-year term of the partnership.
VENEZUELA — In May, the Venezuelan postal service indefinitely stopped making international mail deliveries, officially because of “excessive demand” but most likely because of a dispute between the Venezuelan government and international airlines. Venezuelan laws that limit the amount of money that companies can convert from pesos to other currencies have trapped some $4 billion in airfares in that country, and many international carriers have limited or stopped flights to Venezuela. Venezuelan postal workers protested the decision.
FINANCIAL SERVICES — Banco do Brasil Americas, a subsidiary of one of Brazil’s largest banks, plans to open its first branch in Orlando.
HOSPITALITY/TOURISM — The first U.S. property of Chilean company Atton Hotels — the $65-million, 275-room, Atton Brickell Hotel — is scheduled to open in 2016.
REAL ESTATE — Canadian home builder Mattamy Homes purchased 9,600 acres near Venice for $86.25 million. It’s the largest block of land the company has ever purchased. Developer CMC Group, which is based in Miami, formed a joint venture with the chairman of Moscow-based developer Capital Group, Vladislav Doronin. The joint venture will develop two condominium projects in Miami’s Brickell area.
INVESTMENT — The U.S. government approved Miami’s designation as an EB-5 visa regional center; now, foreigners who invest at least $500,000 in job-creating projects anywhere in the city can be fast-tracked to earn U.S. residency.
AUSTRALIA — P&O Cruises, part of Miami-based Carnival, will add two ships to its Australian feet next year, bringing its total to five and creating that country’s largest year-round feet. The ships will come from Carnival’s Holland America Line. The cruise passenger market in Australia has grown 130% during the past fve years, and Carnival is the only cruise company with ships based full-time in Australian waters.