The economic strength of Latin America? Its people
Beatriz Sanchez, Head Latin America at Julius Baer, prefers to see opportunities where others see challenges: “I can’t think of a better region and of a more diverse group of peoples, of ideas, of cultures and of social, economic and political activities to stay on top of. So it’s really exciting.”
Latin America is a very diverse region, culturally, economically. So how would you describe its economic strength?
Beatriz Sanchez: Latin America’s economic strength is really its people. It’s the energy that its people bring to everyday life, to the future. It’s the energy they bring to change by really looking at where they are today and where they need to be in the future. We have seen many examples of that, as more and more women are being educated and graduating from primary, secondary and tertiary schools, as the labour force becomes much more active in new technologies, as more and more start-ups emerge in Latin America.
And what about the challenges?
Clearly, there is still a large disparity of income. And clearly we need to continue to work on that income disparity, but the awareness of it has become a lot more acute. It remains to be seen what the political changes we are seeing in many countries will ultimately bring – in Mexico, for instance. But in Brazil, in Chile, and even in Argentina, which is going through so many problems economically, there is a sense that things need to be different, that young people need to get much more involved and that a dynamic economy, one that is focused on the future, on new technology, and on smart cities and smart energy use is really the way of the future.
Let’s talk about investment cultures. Where do you see the differences, where the similarities across Latin America?
If we focus on the similarities first, Latin American businessmen and entrepreneurs in general have taken a lot of risks with their businesses in their countries. They have had to deal with devaluation, expropriation, inflation and sometimes even hyperinflation, as well as radical changes in government policy. So there is a lot of uncertainty, a lot of risk and volatility already inherent in their local businesses. Which explains why they tend to be much more conservative when it comes to their ‘sleep-well money’ – the money they save for the family, for the next generations. They tend to be much more fixed-income oriented. And while it may seem a bit counter-intuitive to diversify and invest in your own country’s assets, they feel comfortable with their own country risk because they know it. They also tend to be very US dollar-based because of the geographic importance of the United States.
And the differences?
The differences lie in the extent to which the different entrepreneurs invest in their countries. Obviously, in countries like Mexico or Brazil, where you have a much deeper local market, a much better regulated market, and more options either in the equity market or in the fixed-income or short-term debt market, entrepreneurs tend to invest much more locally. In countries with a more limited scope – Argentina and Peru, for instance – they tend to invest more outside of their countries.
Having said that, I think today it’s really no longer about what I invest in my country of residence and what I invest outside. It’s about an asset allocation strategy. Where are the best opportunities, where are the best valuations and how can I diversify my liquid assets to minimise risk and to get myself a return that’s attractive.
Where do you see the most promising investment opportunities in Latin America?
There are tremendous opportunities in many areas. Take Brazil, for instance: there are huge opportunities in private equity and venture capital, especially in the education space and in disruptive technologies such as FinTech. In Mexico as well, you have lots of biotech and nanotechnology pockets. In a country like Chile, real estate continues to be a very interesting investment. In general, I see new technologies, smart technologies and real estate continuing to be leading factors. And then, of course, you have the traditional investments that Latin Americans always invest in, which is their local fixed-income markets and equity markets.
Tell us about your daily challenges as head of such a diverse and changing region.
That’s funny. I never really look at it as challenges. I look at it as opportunities. Every time there is a change, every time there is an uncertainty, it’s really an opportunity to deliver advice and content and to forge a closer relationship with our clients and even with our colleagues. For me the important thing is to always be on top of what is going on in our countries, what is going on politically, economically, socially. What are the concerns of our clients, what is their day-to-day life like, and how can we inject ourselves into that day-to-day life – and the decisions they need to take – and add value. I can’t think of a better region and of a more diverse group of peoples, of ideas, of cultures and of social, economic and political activities to stay on top of. So it’s really exciting.
How much does your Cuban background help you in getting your daily work done?
Oh, it’s essential. Having been born in Cuba, which was such a force in Latin America during the late 1960s, 1970s, 1980s – and even today if you look at what is going on in Venezuela and Nicaragua, etc. – it really drives me to better understand what the socioeconomic impacts of change can be. And it also allows me to be a neutral player, because I am not Mexican, I’m not Venezuelan, I’m not Colombian. I’m really something a bit more international, and so people tend to feel more comfortable opening up and asking certain questions or maybe going in certain directions than if I had a nationality too close to their home market.
Is there a common denominator in doing business in Latin America?
Entrepreneurs, they really don’t want to waste time. They want to talk to individuals who are informed, who can give them a new angle, a new perspective, and who give them content that they can really use and which helps either their local business or their international diversification. Entrepreneurs also want access. They want access to ideas, to other entrepreneurs, to investment opportunities and to intelligence. They want access to whatever they can’t get on their own. The role that we, Julius Baer, as private wealth advisers need to play is to make sure that we understand our clients – especially those very sophisticated entrepreneurs – and their needs very well, and then see what access we can provide them, whether its external or internal, to really make a difference in their decision-making.
What can we do to attract these entrepreneurs, or what does attract them to Julius Baer?
What attracts these entrepreneurs and these sophisticated investors to Julius Baer are various things. I sincerely believe that being a full-fledged, pure-play private wealth manager, where all our resources, all our investments and all our energies go into private wealth management, is very important. The absence of conflicts of interest is something that entrepreneurs and clients feel very comfortable about. But I also think it’s our platform, it’s our content, it’s our know-how. It’s really taking a stand on things like the next generation. The type of activities we’re doing around mobility, smart cities, disruptive technologies. That’s really the way of the future. If we continue to accompany our clients to that future, we will be able to attract them as well as the next generation of clients. That forward-looking, almost pioneering spirit is a very important element of our DNA, and we must not lose it.
Video production: Scott McNamara