Koreans look to broaden LatAm investment
As South Korea increases and diversifies FDI to LatAm, companies see more space for non-government bank lending
While Korea's investment and lending in
LatAm are perhaps overshadowed by China's and Japan's, Korean
entities are aiming for a bigger role in the region,
particularly if more of the country's banks beyond development
lenders can get involved.
"Some of these deals can be done better if
the banks in Korea are more supportive and provide a more solid
funding structure," said Lawrence Lam, director at Samcorp,
speaking at the recent LatinFinance Latin America
Korea Investors Forum in Seoul.
While oil and gas and mining have been
among the most important areas for investment to date, Lam says
manufacturing will provide more opportunities going forward.
This will open up new channels for investment. A key will be
developing local partnerships with LatAm companies, something
which the Chinese have not exploited fully in their bids for
So far, most of the lending has been
through government-backed institutions such as the
Export-Import Bank of Korea (Kexim), but there may be space for
private sector lenders to be involved as Japan's have been.
Lam highlighted Mexico, Chile, Colombia
and Peru as offering opportunities in the short to medium-term.
Korean EPC providers have been involved in Mexico's power
sector, and the energy reforms now being discussed should open
up additional opportunity.
"The Pena Nieto government is addressing
structural reforms. Ongoing reforms will lay the foundation for
development to which Korean companies and development banks can
contribute," said Yong Hwan Kim, president of Kexim.
ECAs and multilaterals are capable of
providing funds and initiating important relationships - most
notably this year as part of a $1 billion financing for the AES
and Mitsubishi Cochrane power plant in Chile - but they can run
into funding caps in some countries, said John Kim, head of
international finance at SK Engineering and Construction,
leaving more room for the private sector to participate.
While Kexim's Kim highlighted Mexico's
infrastructure project potential, Mexico, Brazil and others
need to advance their buildout to offer more opportunities for
"There are a limited number of projects
that we can look at for EPC. That is the challenge with Latin
America," said Moo Hoon Kim, team leader of the power business
of Samsung, noting that his priorities are Mexico, Chile and
On the asset management side, Korean
investors are increasing participation in high-quality USD
bonds from LatAm issuers along with other Asian investors, said
Hugo Sarmiento, CFO of CAF. A won-denominated bond is
not out of the question for his institution.
"In the past we have been looking at the
Korean market. The opportunity just didn't open up with the
right economics for us," Sarmiento said, referring specifically
to the swap rate back to dollars.LF