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Wednesday, December 12 2018 @ 11:46 PM UTC

Bladex: Latin American Cos See Little Impact From US Stimulus

Panama NewsBy Ken Parks Of DOW JONES NEWSWIRES MEXICO CITY - (Dow Jones) - Regional trade finance bank Banco Latinoamericano de Exportaciones SA (BLX), or Bladex, said its business clients in Latin America don't expect the U.S. economic stimulus package to have much impact on their operations. "In general, 50% of the trade of Latin America is directly related to the U.S.," Bladex Chief Executive Jaime Rivera said in a conference call with analysts to discuss fourth-quarter results. "Demand in the U.S. is down and is still falling. Most companies believe that process will continue," Rivera added. The U.S. House of Representatives approved Friday a $787 billion economic stimulus bill designed to shore up the flagging economy and stem job losses, with a Senate vote on the package expected Friday evening. The plan, while heavy on tax cuts and funding for social services, is relatively light on infrastructure funding that would spur greater demand for Latin America's commodity exports. Latin American economies are expected to post sluggish growth or even shrink this year as global demand falls for their exports, mainly commodities like minerals, oil and agricultural products. (more)

The International Monetary Fund recently cut its outlook for the region's top two economies, with Brazil expected to grow just 1.8%, down from an estimated 5.8% last year, while Mexico's economy will likely contract more than 0.3%.

Bladex, based in Panama City, specializes in providing trade financing to companies and banks in the region. Its shareholders include central banks and state-owned enterprises in 23 Latin American and Caribbean countries.

In the fourth quarter the bank reduced its loan portfolio by $1.3 billion as it curtailed lending and collected on loans to companies in riskier sectors, especially those in commodity-dependent countries like Peru and Brazil.

Bladex made loans for $685 million during the fourth quarter, down from $1.5 billion the previous quarter and about $1.9 billion in the fourth quarter of 2007 as the bank slowed lending amid a deteriorating economic environment.

Its total loan book stood at $3.7 billion at the end of December, of which 83% were commercial, mainly trade-related, loans. Brazil accounted for 42.8% of total outstanding loans, followed by Mexico with 13%, Colombia 12.3% and Argentina 4.1%.

The bank's exposure to mineral-rich Peru, which at the end of 2007 represented 10.2% of outstanding loans, fell to 2.1% at the end of last year.

Bladex also significantly trimmed its exposure to countries in Central America and the Caribbean, a region that Rivera said is one of the most vulnerable to the global economic downturn.

"The good news is we have seen in the last two or three weeks that institutions like the Inter-American Development Bank and others have been pumping money into the region, and because these economies are relatively small the amount of money they are receiving might well allow them to weather the storm better than we thought," Rivera said.

The bank's strong capital position and less competition for trade finance as a result of the financial crisis that knocked many rivals out of the market have put it in a position to lend to credit-starved firms.

Rivera said Bladex will look to shift some of its cash balances to fund new lending this year, provided credit conditions in the region and interbank funding markets remain stable.

"We are spending more time doing credit analysis, making sure the companies that we lend to will be able to survive what we believe is still going to be a worsening economic downturn over the next three to six months before it stabilizes," he said, adding that demand for credit isn't a problem.

Bladex's shares trading on the New York Stock Exchange were recently up 1 cent at $10.50 after the company reported a fourth-quarter diluted loss per share of 12 cents, largely due to an accounting change.

-By Ken Parks, Dow Jones Newswires; 52-55-5001-5723; ken.parks@dowjones.com

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