Trade finance: Troubled waters

Sep 1, 2012

The eurozone crisis and a tightening regulatory screw have intensified a mismatch between emerging trade flows and the provision of trade finance. Latin American companies and

By Oliver O'Connell

European banks have a long history in Latin America, closely related to international trade. The 2008/09 global financial crisis placed many of them in a strong position as US banks backed off from trade finance lending.

But the eurozone crisis of 2011 triggered a reversal of fortunes, with a large-scale retrenchment of trade finance lending by European banks, which had been an essential part of the market. Gaps emerged - and were often exacerbated - in the provision of trade finance both direct to corporate clients and to financial institutions.

Today, a renewed European recession, a lackluster recovery in the US, and a slowdown in China, have compelled Latin American companies and their national governments to explore developing new trade and investment flows.

In 2011, Latin America's exports grew 5.3% and imports 10.4% - well above the world average - but with global growth slowing there are...

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