ARGENTINA Q&A
Argentina and beyond: a time for reform
Diogo Figueiroa, Vice President and Head of Trade Finance at Espirito Santo Bank speaks to IFLR1000 about the need for regulatory reform across the region.
When it comes to choosing outside counsel, what do you look for? Reputation, first of all. And the counsel we hire needs to be counsel with a good international network, so that we can rely basically on one point of contact at one firm to do business in many countries. We don’t want to be dealing with 15 counsels in 15 countries, rather we need a single contact to structure deals in all the countries we are looking to do business in. And then, the most important thing of all, we need counsel that protects the in- terests of the bank but at the same time keeps a pro-business attitude. Un- fortunately, it happens frequently that attorneys want to protect so much that at the end of the day, it ends up being a deal breaker. They want so much control on transactions that their stewardship of a critical matter is likely to lead to an event of default.
And if we have a good volume of successful deals, naturally we will con-
tinue to work with the same attorney. I think it’s very important to work with an attorney you’ve gotten to know well and understands reciprocity by lowering legal costs based on the volume of business you give them. The more business we do together the better we know and trust each other and we need to trust in good partners to protect the interests of the bank, par- ticularly in the type of transactions we do which are backed by governments of several countries through their export programs in which the main risk is documentation.
What sorts of things do you need to watch out for on cross-border fi- nancings? The major risk we face is the documentary risk. That’s why we need to make sure that in the case of a default of a client, the proper documentation is in place. It’s very important the due diligence and credit assessment of the Bor- rower on the credit perspective but on the documentation side it is funda-
26 ENERGY & INFRASTRUCTURE | LATIN AMERICA 2013
mental that all trade and loan documentation required to finance the export transaction is reliable, trust worthy and documents properly all the condi- tions to avoid any type of fraud.
In terms of regulations, I work with so many countries that it’s difficult
to say which issue is the most problematic. Each one has its own character- istics. I know it may not exactly answer your question, but it is important to have very experienced and knowledgeable counsel in each of these coun- tries, and of course that can support the fulfillment of the conditions that we require in the loan agreements in the case something errs on the side of the borrower.
With regard to loan documents, everything must be enforceable in the
country and all the information provided corroborated and cross checked internally; each country has its own challenges as Mexico, Brazil, Colombia, Central America and even Argentina. The latter country has been difficult for us as it is complex for these foreign debtors to process loan payments in US Dollars. It’s a challenge in terms of risk and doing business with Ar- gentina. In the few transactions we’ve done in the country it is particularly difficult and we need to make sure that from the beginning, all the right documentation is in place, especially with regard to import permits, regis- tration of debt in the central bank, that, if done incorrectly could prevent the release of US Dollars to pay an external obligation. As a consequence we have been reducing the volume of loans to the country because we just have too severe of a political risk in these type of situations.
Argentina’s default was in 2001. Argentina was never an important mar-
ket for us, however the economy started growing and there was an increasing demand for imports of capital goods. We decided a couple of years ago to
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