FXall

Brazil Corporate Treasury Update

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Report date:

27 Mar 2024

Topics covered in this report:

Bank Relationships, FX, Hedging FX, Receivables, Boletos, payroll, PIX, Tax, Supply Chain Finance

Service providers discussed in this report:

Bradesco, Itau, Citi, BAML, JP Morgan, Santander, FXall

FX & Treasury in Chile

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Report date:

31 Oct 2022

Commentary

For many years, Chile has been the poster child for Latin America: after a very difficult period in the early 1970s, it has become a haven for economic and political stability, with an economy which works well, few or no exchange controls, and an environment which is more business friendly than virtually any other country in the region.

The scenario has been somewhat tarnished since 2019, with violent public protests against rises in the cost if living, and a contentious referendum on changing the constitution – changes which were rejected by a large majority. However, in fairness, it must be said that the current constitution dates from the rule of General Pinochet, and the reaction of all political parties appears to have been that the proposal was too radical, and needs to be modified to reflect the wishes of the electors.

Against this background, all participants in the call confirmed that Chile is business friendly. For one, it has become a major market, while several others have made significant recent investments and acquisitions there. No participant has any serious doubts about the country or its future, and all view the absence of FX controls as greatly simplifying their lives.

However, all is not roses, mostly due to slow progress in administrative areas:

There is a lot of bureaucracy. In particular, FX trades must be reported to the central bank, even though they are all allowed.
The country seems to be slower than most in adopting digitalised banking. Wet signatures are required for virtually every payment and transaction, with no exceptions, even during COVID. This adds a layer of cost and inefficiency, which is surprising – Argentina and Brazil score better on this.
Most foreign banks seem to have a weak presence. Citi operates through a partnership with a local bank, Banco de Chile. This works quite well, but you have to ask, for example, to get the benefit of group pricing or to access Citi’s banking platforms. These are available through Banco de Chile, but they do not necessarily advertise the fact.
Many other foreign banks are present, notably Santander and HSBC. But it does not seem to be a focus market for them.
The regulations are onerous, and

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Topics covered in this report:

Hedging FX, FX, Bank Relationships, KYC, Cash Pooling - cross border, Cash Pooling - domestic

Service providers discussed in this report:

HSBC, Citi, Santander, BBVA, BAML, JP Morgan, Scotia, Banco de Chile, Banco BCI, BancoEstado, BancoSecurity, 360T, FXall, Deloittes

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Approaches to FX Volatility

Read more about Approaches to FX Volatility

Report date:

20 Jun 2022

Commentary

FX – one of the biggest and most important challenges we all face. It has a direct impact on the business, and everyone has a view.

The calls (European morning and afternoon to accommodate Asia and the Americas) were to discuss the latest bout of increased FX volatility, and the impact it is having on people’s hedging strategies – if any. Unsurprisingly, it turned into a long discussion of the way different companies approach hedging. The report below is long and very varied – we managed to reduce it to 20 pages, but they are dense. As to current volatility, some people are adjusting their strategies, but most prefer to stick with the approach which has already been defined.

What is that approach? The participants came from a variety of different industries, and covered a broad range of different ways of handling the issue.
Everyone has a defined hedging approach, though most contain some degree of flexibility. So, if the approach is to hedge the next 6 months, for example, there may be leeway to go down to 4 months or up to 8.
Most people add their hedges via a layering approach, where they build up the hedge over time. This provides an average hedge rate, and avoids the risk of choosing a single point in time.
Everyone tries to match their hedges to the needs of the business. This involves co-ordinating with the business units to get their input on the ability to change prices, how long it takes to do so, etc.
Most companies have a centralised approach to hedging, but there is variety as to whether central treasury acts as and advisor, or as a decision maker. In most cases, this is decided by the company’s internal measurements and incentive system.
Several companies try to insulate the operating units from the effects of currency. This is done by various means: several participants operate....please sign in to continue.

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