For the few Latin Americans with vast inherited or accumulated wealth, 2020 was a very good year. 

Yet private banking in the region is in a state of flux. Major international banks are abandoning some Latin American markets while ratcheting up wealth management services in others.

Regional banks, meanwhile, strive to strengthen their industry and deliver a full range of international investment vehicles. LarrainVial clients, for example, sought diversification this past year, showing particular interest in Asian emerging-nation equities, says Gonzalo Córdova, head of Wealth Management. Córdova credits fast adaptation and well-coordinated support from internal partners in compliance, risk, strategy and tech for the bank’s 2020 growth in both assets under management (AUM) and clients.

In Brazil, private banks increased their AUM 24.3% in 2020 to $312.5 billion, according to the Brazilian Association of Financial and Capital Market Entities. The sector attracted over 10,000 new clients. Low-to-zero real interest rates drove client interest beyond plain vanilla to variable income instruments, new asset securitizations, venture capital, IPOs and more. New digital independent private banking platforms willing to welcome customers with smaller fortunes were a second major driver of change.

Rogério Pessoa, co-head of Wealth Management at Brazil’s BTG Pactual, says BTG’s AUM in this segment rose 54% last year. Adding qualified lower-tier clients, the bank registered an 80% year-on-year jump in March, to $61.5 billion. BTG’s prior tech investments helped it benefit from the “frenzy” in the Brazilian private banking market, Pessoa says. “The experience of our clients today is completely different from that of three years ago,” he adds, “and in 24 months everything will be changed again.”

BTG is improving its offices in Miami and New York to better serve Latin American customers than sometimes-fickle giants. Last year, JPMorgan Chase sold its Brazil operations to Bradesco and this year abandoned Mexico, transferring those clients to BBVA. Bank of Montreal also recently abandoned Mexico. “We deal with Latin American customers like no one else,” says Pessoa. “Our main market is Latin America, where we are the major investment bank.”

In Colombia, Bancolombia drew its private bank clientele to the international—especially the US—equity markets, pushed by IMF estimates for 6.4% US economic growth in 2021. “We project major investments by our clients in the US equity market, even with the risks there,” says Juan Felipe Giraldo, president of Valores Bancolombia, which grew its total AUM by 4% last year. Giraldo observes that wealth management in Colombia has attacted foreign competitors, but the bank’s ESG funds proved attractive.

Banco Cuscatlan doubled its private bank clientele in one swoop when it acquired Scotiabank’s wealth operations in El Salvador last year,. It now serves some 1,200 wealthy individuals with $300 million in AUM—impressive in a small Central American economy where less than 1% have the $500,000 to qualify for private banking services.

Its private banking may be vaulted forward by a government effort, already underway, to build an offshore financial hub. “We hope to manage here the Central American wealth that nowadays is invested abroad,” says José Eduardo Luna, executive director of Banco Cuscatlan. He estimates implementation will take two more years, considering the needed legislative changes. “The fact that El Salvador is a dollarized economy near to the US, and an Avianca hub, favors this project,” Luna says. “[It could] bring our private banking sector the deposits of our neighbors’ richest citizens.”

One thing seems clear: Latin America’s wealthiest will continue to enjoy a wealth of options.

Few Central American governments had any fiscal room to move during the past year to either treat the people’s physical health or shore up the nation’s economic health. That made banks all the more important as bulwarks of stability and financial strength.

Despite the social and economic challenges of 2020, Central America’s banking sector benefited from previous investments in digital transformation. Indeed, banks have been regional leaders in spurring technological development in these countries. Our Best Bank award winners are forging ahead with digital transformation as they innovate new products and approaches to finance, all while serving their communities.

For its investments in digital tools, financial relief for small and medium-size enterprises (SMEs) and role in supporting local clients, BAC Credomatic takes

2021 Best Bank awards in three Central American countries: Costa Rica, Honduras and Panama. Controlled by Colombia’s Grupo Aval, the bank is also active in three other countries and thus takes the regional award for Best Bank in Central America.

To serve customers better, and in line with the parent company’s technological orientation, BAC in Costa Rica, Honduras and Panama undertook significant digital transformation. The bank improved digital platforms and expanded its channels to offer services through alternatives, such as WhatsApp. It introduced real-time transfers using debit cards, a system that allows store partners to act as little branches; and Swift gpi to make companies’ cross-border payments safer and more transparent. With these measures, 90% of customer interactions with the bank are now digital. In addition, BAC is embracing new guidelines with respect to sustainability, in both defining appropriate measures and setting achievable, meaningful goals.

Besides the extension of loan payments and other relief measures for individual clients and companies impacted by the Covid-19 health crisis, the bank took various measures to support society in each of the three countries. BAC Credomatic San Jose, in Costa Rica, adopted programs in the area of social responsibility and for empowering small and mid-sized enterprises, as well as financial education for individual clients. BAC Credomatic Panama followed the same path and also funded organizations dedicated to Covid-19’s victims. It further created programs on finance education and empowerment of women. A 20.4% growth in assets was registered by BAC Credomatic Honduras, which now manages $4.5 billion. The bank adopted a special program for SMEs and funded nine organizations focused on health assistance.

The Salvadoran Banco Cuscatlán benefited substantially from the acquisition of Scotiabank El Salvador in 2020. This ambitious merger resulted in a 112% growth in Cuscatlán’s assets, to $3.8 billion, and a 127% jump in deposits. Its efficiency ratio climbed 64.4%. Investment in the integration of the two organizations’ computer systems and digital tools is already delivering benefits for 600,000 new clients.

In Guatemala, Banco Industrial also improved its digital infrastructure, incorporating artificial intelligence into new products and adding features such as voice-activated control. The bank innovated its approach to SMEs—with new credit lines: one for companies founded by women, for example; another was designated for small food stores.

Among the leading banks in Nicaragua, Banco LAFISE Bancentro substantially improved its digital tools during 2020 while preserving its financial health in the face of economic crisis. The bank developed a new digital platform to increase the financial inclusion of small companies, a smart money-payment system for mobile, and a module for payment management with access to financial lines. During the pandemic, Banco LAFISE Bancentro invested $115 million to support the economic recovery and managed a fund that invested in Nicaraguan companies with a high potential for success

With beaches and resorts empty, the Caribbean is deprived of a large portion of the economic activities that characterized its landscape, with no replacement prospects on its sunny horizons.

Even prior to the crisis, the financial sector was in a state of flux, after Santander, Scotiabank and Royal Bank of Canada (RBC) decided to sell off parts of their business in the region. Those changes had significant impact on this year’s selections. Mergers aside, Caribbean retail and corporate banks have hunkered down during the past year, focusing efforts on speeding digitalization and providing financial support to local clients.

Banreservas of the Dominican Republic takes the top prize as Best Bank in the Caribbean, as well as its home-country award. A major DR institution by assets ($11.2 billion), Banreservas used previous investments in technology to adopt new mechanisms to facilitate customer banking through the pandemic. One of the most important was the rapid design of a digital tool to reach 700,000 poor families and allow them to receive government subsidies. New technology pushed the bank’s digital transactions to 71% of the total. Overall, the bank saw a 13.7% increase in assets and a 24.8% return on equity; and it fattened its loan provisions ($133.9 million), preserving its AA+ national long-term Fitch rating.

Beyond extending loan payments and reducing its credit card interest rate to 1%, Banreservas moved ahead with two programs to prepare local businesses for recovery: one supporting development of cooperatives, the other supporting sustainable building projects. The bank also joined Unicef in a program on education and financial inclusion.

The National Commercial Bank (NCB) takes the country award again for Jamaica. The bank has crafted an ambitious medium-term strategy focused on building a top-class financial ecosystem by 2024 based on improved technology and analytical tools.

In the past year, NCB adopted Braille kits to make ATMs accessible for visually impaired customers, introduced a token for access to its platforms using mobile devices and registered a 100% increase in mobile transactions. Despite a high level (35.8%) of nonperforming loans (NPLs), NCB’s assets grew 10% to $6.2 billion; and the bank remains the national leader in assets and deposits.

After completing its acquisition of Santander Puerto Rico for $1.3 billion, First BanCorp saw its assets jump from $18.8 billion to $ 24.3 billion by the end of 2020. With this merger, the bank gained musculature to compete in a dynamic financial field that is subjected to regulation by the US Federal Reserve. The deal also brought the bank Santander’s added technological capacity and sustainable standards.

Scotiabank Trinidad & Tobago takes a country award for its strong investment in technology and support for its community during the pandemic, as well as its good financial results and low level of NPLs. Scotiabank’s agenda for local business included payment deferrals for 75,000 companies.

RBC Royal Bank takes the prize in Turks & Caicos, where the parent institution introduced its standards on digitalization, optimization, simplification and also its commitment to environmental, social and governance (ESG) issues. Barbadian operations should be strengthened this year by the closure of RBC branches in the other Eastern Caribbean islands. This decision can also favor the bank’s transactions in Turks & Caicos, where RCB operates with a smaller structure.

Belize Bank this year is starting to enjoy the acquisition of Scotiabank’s operations in this country, which give it around 49% market share. This acquisition is expected also to awaken the bank for the necessary ESG commitment and faster digitalization. Last year, Belize Bank introduced a digital wallet service and implemented its digital bank, which allows operations through mobile devices and text messaging.

Republic Bank takes two awards: Best Bank in Barbados and Best Bank in the British Virgin Islands (BVI), with the acquisition of Scotiabank’s operations playing a key role. In Barbados, the purchase increased Republic’s assets by $1.5 billion. In the BVI, the bank added $551.7 million to assets when the acquisition was concluded in June. Republic Bank will gain from the digital improvements adopted by Scotiabank.

As the Covid-19 pandemic spread over Latin America without mercy, the local banks stepped up to serve critical roles in helping their nations cope with the two crises: the pandemic and the consequent eco nomic collapse. Banks on the ground first leaped to adopt measures to protect employees and customers from contagion and to upgrade digital resources to meet the increased demand for contactless banking.

In evaluating candidates for Global Finance’s 2021 World’s Best Banks in Latin America, a major set of criteria revolve around how these institutions maintained their own financial health. A second set considers how well they provided their individual clients with the means to survive, perhaps even thrive, through new waves of contamination, low vaccination and little GDP recovery.

With Brazilian coronavirus variants gaining force and crossing borders, the region may be at risk of a repeat in 2021. The finance sector, no less than health care, is preparing for this possibility while hoping for a sunnier outcome.

Regional Leader

Itaú Unibanco, Brazil’s largest bank, takes our 2021 Latin America regional award. Itaú managed well the pandemic-driven increase in default risk, opening $37 billion worth of credit, largely to corporates and small and midsize enterprises (SMEs); offering debt payment deferrals and extensions; and investing $14.5 million to follow safety protocols in its 3,158 branches. The bank’s commitment to environmental, social and governance (ESG) principles was underlined by its investments in renewable energy projects and its launch, with Bradesco and Santander, of the Amazon Plan to boost sustainable development of the tropical forest.

Recognized as a Latin American leader in deploying technology, in 2020 the bank upgraded its digital infrastructure, migrated to Amazon’s cloud and directly invested in Quanto, a Brazilian open-banking fintech platform for retailers. The bank promotes development of startups through its innovation hub Cubo Itaú. Despite Brazil’s economic disaster, Itaú Unibanco was able to increase assets by more than 21%, to a total of $384 billion, and maintain its domestic Aa1 rating from Moody’s Investors Service.

Banco Bradesco, another top Brazilian bank, takes Global Finance’s top honor at home. After nearly eight decades in operation, Bradesco manages $301.8 billion in assets (18% above 2019) and holds a 12% market share. The bank has just 2.2% nonperforming loans (NPLs) and bolstered reserves by $2.1 billion.

Bradesco made two bold acquisitions in 2020 that should turbocharge its wealth management: JPMorgan Chase’s Brazil operations and BAC Florida Bank. It is a leader in its commitment to sustainable goals, with emissions reduction and the Amazon Plan as centerpieces; and in social programs, through the Bradesco Foundation. Bradesco’s insurance arm supported a private initiative to construct a temporary field hospital in Rio de Janeiro to treat Covid-19 patients last year.

As the pandemic spread, Bradesco introduced digital tools to facilitate client transactions—from renegotiation of debts to major investments. Tools such as artificial intelligence (AI) and digital wallets helped push total transactions up 9%.

BBVA Mexico similarly reinforced its technological tools and ESG commitment in Mexico while helping clients through a difficult year, taking our award as the Best Bank in Mexico. Holding nearly 24% of the total deposits in the country, this bank increased assets by 18% last year to $116.8 billion; and the bank kept its return on equity (ROE) at 22.3% while limiting NPLs to 2%. BBVA Mexico offered key support through the pandemic: restructuring debt, postponing payments, opening new credit lines and more.

Covid-19 made technology improvements a necessity for serving its 21 million clients, who were able to make contactless payments on their cellphones thanks to the bank’s adoption of near-field communications technology last year. More than half of BBVA Mexico’s customers are digital-only.

Southeast Standouts

In the Southern Cone, two state banks made a big difference in mitigating the crisis. Banco de la Nacion Argentina (BNA) was the government’s main tool to support SMEs, spread financial help to the most vulnerable and deliver wages to a vast number of workers. A major bank by assets and clients in Argentina, BNA maintained key indicators of financial health, ESG commitment and digital investment.

The Banco de la Republica Oriental del Uruguay (BROU) followed the same path as BNA and was chosen as the best Uruguayan bank. Responsible for 43% of the banks’ assets in this country and a huge partner for trade companies, BROU had a good financial performance in 2020. It implemented a new digital platform and granted automatic extension of loan payments for companies with less than $200,000 in debts, among other measures.

Banco GNB Paraguay is the country winner for its performance last year. This January, after gaining the approval of regulators, it completed the bold acquisition of BBVA Paraguay for $251.3 million. The institution is expected to become the country’s largest bank in deposits and the second in terms of assets, with about $3.3 billion in 2021.

West Coast

In the Andes, Banco de Chile, the Colombian Banco de Bogota, Banco de Credito del Peru, Ecuador’s Produbanco and the Bolivian Banco Mercantil Santa Cruz are the clear winners in their respective countries. All of them took benefits of their previous digitalization programs, which were accelerated in 2020; embraced the mission to assist their clients with financial difficulties; and improved their social role. They also reinforced their efforts to support the environment and ESG goals.

Banco de Chile, founded over 120 years ago, an institution responsible for managing $58.9 billion in assets and serving 2.2 million clients, registered reasonable ROE (13%), a high efficiency ratio (45.5%) and a low level of NPLs (0.97%) in 2020. Global Finance’s 2021 Best Bank in Chile was also able to preserve its A1 asset quality measured by Moody’s. To improve its electronic connection with clients during the pandemic, it launched new applications, renewed its corporate website and created a 100% digital account. Banco de Chile was responsible for $2.6 billion in transfers from the government to small companies and created its own program to help this segment, besides its actions to assist vulnerable families.

During a devastating year, the 150-year-old Banco de Bogota was able to soften financial obligations for most of its 19 million clients; but it also took care of its employees’ “new normal” with a program of psychological and other support. The bank made several digital improvements so clients could access relief measures through apps and social media. It built an AI advisory and created a medical phone line for its customers. Despite conditions, Banco de Bogota launched a new educational program. It also kept its environmental goals, such as support for a reforestation project in the Amazon region, issuance of an $83 million green bond and creation of a credit line for sustainable projects.

Also well over a century old, the Banco de Credito del Peru reached 4.3 million digital clients in 2020, composing more than half its total customers. The bank invested mainly in cybersecurity and a new innovation center focused on financial solutions. In a country hit hard by Covid-19, the bank donated $24 million to help struggling Peruvians and more than $9.3 million for educational programs.

In Bolivia, Banco Mercantil Santa Cruz also greatly increased its digital accounts–to 30% of the total–and more than 90% of clients’ transactions were concluded using electronic means, particularly through its new 24/7 bank platform. It was a key partner in disseminating government-backed financial help to SMEs.

To mitigate economic damage, Ecuadorian Produbanco focused on small companies, granting $399 million in new loans for those from the productive sectors, and became one of the country’s largest contributors to the struggle against poverty and violence. Its 1.1 million clients enjoyed the bank’s massive investment in digital tools, which include a web network for health emergencies. The bank initiated a business center for teenagers and supported women’s entrepreneurship through the Cafe Mujer, following health protocols, of course.

BBVA Provincial is the winner in Venezuela. Even in a chaotic political and economic environment, the bank consolidated its position as the main institution by assets ($841 million) and registered a significant ROE (21.3%). A pioneer in open banking in Venezuela, the institution invested last year in instant payment tools and adopted a new chatbot that enables payments via social media.

If e-commerce was already a prospering segment in Latin America, where unicorns found fertile ground to multiply, the Covid-19 pandemic has created a new environment in which many local businesses can survive only with a strong online presence. Even relatively small companies are investing in technology, payment services, logistics and new means to reach and satisfy customers.

Retail e-commerce, as a result, jumped 36.7% in 2020, to $84.9 billion in sales throughout the region in 2020, according to SkyPostal, Latin America’s largest private mail and parcel deliverer. And there is little sign the shift will reverse itself.

Local and global platforms were already surfing an impressive wave when isolation measures kicked in. Since then, demand has grown more rapidly. Argentina’s Mercado Libre, the leader in Latin America, doubled its operations in 2020.

In Brazil, digital sales grew 68% to $41 billion last year, according to the National Confederation of Commerce, Goods, Services and Tourism (CNC). International data consulting firm Kantar found that total e-commerce sales in Argentina jumped 124% to $10 billion. In Panama, e-commerce jumped to 8% of retail sales, more than the 7.8% in Brazil, according to Magento Commerce, Adobe’s e-commerce platform.

The numbers reveal a deep and accelerating transformation in how goods are sold and delivered in Latin America, embedding changes in technology, logistics and digital payments and opening a new market for consulting and service companies. Pandemic-related measures to ease credit availability are helping companies invest in these changes and shifting many informal and unemployed workers into gigs delivering food and small packages.

But Latin America still has a lot of work ahead if its economies are to benefit fully from the new efficiencies. World Bank consultants Edoardo Totolo and Hemant Baijal, in a recent blog post, warn that now is the time to simplify regulations on finance services, improve digital literacy, reduce the high cost of service access and raise levels of financial inclusion.

This year is shaping up to be one of the most challenging in decades for Latin America. Optimism stemming from the positive growth of the fourth quarter of 2020 bumped up against a second wave of Covid-19 infections in the first months of 2021, reducing space for fiscal action. That makes it uncertain whether governments can maintain policies in support of the most vulnerable people and small companies while also amassing an adequate volume of vaccines, a key element for economic recovery.

Nations in the region are focused on boosting their competitive sectors, especially the commodity exports’ rising prices, although some are engaged in tax, fiscal, judicial and administrative reforms that could diminish their attractiveness to business in a post-pandemic era.

The Andean nations are looking to increase revenue from their mining and oil/gas sectors, as tourism isn’t expected to return in the short term. Brazil and Argentina are clinging to their agribusiness production, as the manufacturing and services sectors still walk a tightrope. Mexico hopes to benefit from implementation of the new United States-Mexico-Canada Agreement on trade.

Happily, the region is not experiencing balance of payments troubles. But considering its poor growth performance over the past decade, lack of productivity and rising poverty and inequality, most projections of partial economic recovery in 2021 merit a skeptical look. Currently, both the World Bank and the UN’s Economic Commission for Latin America and the Caribbean (ECLAC) estimate 3.7% growth this year following the -6.9% to -7.7%, respectively, estimated for 2020.

“The key point is that 3.2% growth isn’t enough to compensate for the strong fall in the region’s GDP,” says Daniel Titelman, director of the Economic Development Division at ECLAC. “It’s not genuine growth. In an optimistic scenario, we expect recovery to the 2019 levels only in 2023 or 2024.”

While the region faces a new Covid-19 wave “with no ammunition,” as Eric Parrado, chief economist  at the Inter-American Development Bank (IADB), says, “it must pass reforms to seek a more sustainable fiscal structure, a more open business market and access to international capital flows. There is no more time to postpone these changes.”

These actions will be the center point of the IADB’s annual meeting in Barranquilla, Colombia, this month. The bank also expects to raise its annual lending capacity from $12 billion to $20 billion with the support of the US and other developed countries to address the region’s increasing demand for infrastructure, energy and social projects.

Extension of emergency aid for the poorest, the unemployed and small companies will play a key role in boosting domestic consumption: the mainspring of growth at this point. Despite market unease, Brazilian President Jair Bolsonaro is considering a new round of emergency aid for the country’s poorest. Even in default on bond payments and amid negotiations with the International Monetary Fund, Argentina has maintained social aid.

Brazil: Reform on the Backburner

Brazil, the biggest economy of the region, is absorbing the second heaviest hit from Covid-19 of any country in the world by the number of deaths due to the disease—accentuated by Bolsonaro’s failure to adopt many protective measures that other governments have implemented. Neither tax nor administrative reform is on the official schedule, despite international institutions’ and investors’ concerns whether the country can deal with its fiscal challenges. The primary deficit should reach 3.3% of GDP in 2021, and public debt now equals 95%, according to São Paulo–based macroeconomic consultants ,MB Associados.

Other widely recommended measures, like a privatization plan, are on the back burner despite support from the Ministry of the Economy. Instead, Bolsonaro has created three new military-controlled state companies, replaced the CEO of Petrobras (a state-owned Brazilian petroleum company) and criticized the mixed-controlled oil company’s pricing policies. Petrobras lost $20 billion of market value in only two days after Bolsonaro’s intervention. The government’s failure to enforce environmental policies against the destruction of the Amazon forests has also discouraged foreign investors from venturing back.

Spectre of De-Industrialization

Another red light flashed in January, when Ford Motor announced its departure after a century of production in Brazil, raising the specter of deindustrialization. Between 2015 and 2020, 36,600 manufacturing companies closed their doors in Brazil, of which 5,500 ended operations last year, according to the National Confederation of Commerce, Goods, Services, and Tourism (CNC).

“This fact could be avoided if Brazil’s structural costs, like tax, logistics and transportation, had decreased,” says Sergio Valle, chief economist at MB Associados. But that won’t happen absent government action. The World Bank and ECLAC project the economy will grow only 3% and 3.2%, respectively, this year: not nearly fast enough to counterbalance its plunge in 2020, which the two bodies pegged at -4.5% and -5.3%.

There are some hopeful signs. Despite uncertainties over legal and regulatory measures that compromise investment plans, Brazil is expecting good results from new private-sector concessions in ports, airports and sanitation services, including in construction and operation, and also from export of metals and agricultural commodities. A pivotal event will be the auction of 5G mobile connection rights, which could spur growth in the technology sector.

The Central Bank of Brazil, meanwhile, is pushing reforms to increase financial sector competition. Its efforts have already born fruit in the adoption of a real-time payment system last November; and the implementation of the country’s open-banking regulation, the first phase of which commenced last month.

Argentina: “Fintech’s Year”

In Argentina, where agribusiness complains that high taxes and limits imposed by the current government have hobbled its competitiveness, the tech sector is becoming more active. Unicorns like MercadoLibre, Prisma, Globant and OLX are launching a new wave of entrepreneurship.

“This will be fintech’s year,” says the economist Luis Secco, adding that this development could provide a critical boost to one of the smallest financial sectors in Latin America. Meanwhile, with the country’s hydroelectric power plants suffering from drought, the government is betting on a concession program that authorizes private companies to build and operate four new gas production plants.

Chile and Colombia: Positive Signs

Despite last year’s GDP collapse, Chile and Colombia emerged comparatively well positioned to face the next wave of the pandemic.

Colombia had one of the highest unemployment rates in Latin America last year, says José Antonio Ocampo, former Colombian minister of finance and public credit and now director of the Economic and Political Development Concentration at Columbia University’s School of International and Public Affairs. However, strong macroeconomic management, credit expansion, social aid; and growth in the financial services, health, agriculture, manufacturing and construction sectors helped the country avoid a deeper recession.

“Foreign investments are expected in the mining, oil, gold, manufacturing and financial sectors,” says Ocampo. “Colombia is a very open market.”

Chile, with close ties to China, is reaping benefits from the recovery in Eastern Asia—China should see 7.9% GDP growth this year, according to World Bank projections—including the fiscal space to extend the social measures it adopted in the face of Covid-19. Copper prices are already 49% above 2020 levels, improving prospects for exports. The process toward adoption of a new constitution will begin in April with the election of a Constituent Assembly, followed by a ratification plebiscite next year. In between, a presidential election will be held in November. The succession of events is no cause for concern, Titelman argues.

“Chile is a solid democracy,” he says, addressing the risk of a populist victory.

Rising populism, however, is expected to be a factor in elections elsewhere in Latin America this year—especially in Peru, where the two presidents previous to the incumbent were impeached and deposed, respectively—and the effects of the pandemic strongly reverberate. Ecuador, Nicaragua and Honduras will also have an opportunity to choose new presidents; while Argentina and Mexico face midterm elections. With poverty and inequality growing, political unrest could make a regional economic recovery even more difficult.

Difficult times persist for the Central American and Caribbean economies, as tourism is not expected to start its recovery before the second half of this year, if then; and in the interim, more countries sink into fiscal crisis. Multilateral institutions continue to call for the region to reform its regulatory and tax regimes as a means of attracting foreign investment.Yet, presently, governments’ most urgent concern is getting access to Covid-19 vaccines.

“The Caribbean countries have complex and structural vulnerability caused by their dependence on tourism,” says Daniel Titelman, director of the economic development division at the UN’s Economic Commission for Latin America and the Caribbean (ECLAC), “and Central America was caught by the pandemic when it already had a high level of indebtedness.”

Both regions “are engaged in a race between access to the vaccine and the second wave of Covid-19,” says Eric Parrado, chief economist at the Inter-American Development Bank (IADB). The IADB sees an opening for diversification in the Caribbean, especially aimed at new sectors like call centers and digital services linked to demand in North America and Europe. For US manufacturing companies, the prospect of accessing suppliers closer than Asia is attractive. “But these countries will have to provide incentives and engage in structural reforms,” Parrado warns.

Following a 7.9% drop in regional GDP in 2020, the Caribbean economy should grow 4.2% this year, by ECLAC’s estimate; while the World Bank projects a 4.5% recovery from a negative 7.7% 2020 performance. In Panama, one of the brightest Central American economies in recent years, GDP dropped between 8% and 11% in 2020 due to slumps in construction, manufacturing, domestic consumption, transportation and tourism. These sectors collectively account for 53% of the country’s GDP, according to Samuel Moreno, director of Panama’s National Institute of Statistics and Census.

The 2020 crash “will not be compensated this year by the movement of the [Panama] Canal, ports and agriculture, despite the fact that they can give oxygen to our economy,” Moreno says. “We’ll prioritize social subsidies and attracting foreign investment in logistics, ports, mining, livestock, fishing and the agricultural sector while trying to prevent tax evasion.”

At Risk of Default

El Salvador and Costa Rica are in greater trouble. The former is at risk of default while the latter is hoping a $1.75 billion, three-year agreement with the International Monetary Fund will be approved this month to forestall further fiscal deterioration, says Nathalie Marshik, head of emerging markets sovereign research at Stifel Financial.

“The Costa Rican economy collapsed in 2020,” says Marshik, “but it can improve its GDP with the greater external demand for medical and agricultural goods.”

The Caribbean zone endured a loss of 500 million tourists in 2020, accounting, in some countries, for almost 100% of the business. In the Dominican Republic—where tourism is typically responsible for 28% of GDP, drives the agricultural sector and has a huge impact on tax income—the shrinking economy was bolstered to some extent by a record $7 billion in remittances from Dominicans abroad. The same level of injection is expected this year. Financial services and medical supply manufacturing are also expected to reach a 4.5% growth rate, says Antonio Ciriaco Cruz, vice dean of the Faculty of Economics of the Autonomous University of Santo Domingo.

However, the government will have to scramble to find money to cover the expanded social assistance and aid to some sectors of the economy that the crisis demands. “The strict fiscal scenario opens the debate on reforms to raise the tax burden, nowadays only 14% of the GDP; and to better deal with our public debt, which reaches 70% of the GDP,” says Cruz.

The economies likely to recover most quickly are those supported by commodities exports and those receiving investments in digital platforms, e-commerce and applications, like Jamaica, Costa Rica and the Dominican Republic, says Cruz. These investments can give the Caribbean and Central America the resilience they need to meet their external and domestic challenges, says Cruz.

“They can also use part of the gains resulting from these investments to build countercyclical funds, such as Chile and Guyana are doing,” he says, making them more resilient in the face of the economic crises and natural disasters that often damage the regions.

Where uncertainty prevails, Cruz warns, is in the so-called fiscal paradises such as Panama, the Bahamas, Barbados, and Dominica. Statistics on capital flows in these countries are opaque, and the hit to GDP from the pandemic affects their ability to tackle poverty and social inequality. Some new IT investment is providing a counterbalance.

However, “the problem is that all the capital movements to and from these countries have not been translated into better living conditions for their local population,” says Cruz. “The richest people continue to live in their old metropolises, which benefit most from the Caribbean financial system. The rest are economically vulnerable and dependent on industries such as the tourism that have no prospect of total recovery in 2021.”

Methodology: Behind the Rankings

Global Finance staff select winners for these awards based on entries submitted by banks, company documents and public filings. No proprietary information was sought or shared in the awards process. We consider local market knowledge, global footprint and investment breadth and sophistication. Because metrics are rarely public in this sensitive corner of finance, we incorporate perspective from analysts and consultants. Performance data are also drawn from industry sources including Scorpio Partnership’s annual Global Private Banking Benchmark and Asian Private Banker magazine’s regional league tables. Size and growth are a factor, but Global Finance also considered creativity, uniqueness of offering and dedication to private banking as a core business either globally or regionally.

 BEST PRIVATE BANK FOR BUSINESS OWNERS

The Caribbean islands, a paradise for private banking, were deeply impacted by the Covid-19 pandemic and the consequent economic crisis; but the capacity of those institutions to manage their richest clients’ assets suffered very little.

The 170-year-old National Commercial Bank Jamaica (NCBJ) maintained its position as one of the most profitable groups in the region and the largest Jamaican financial organization overall. Outside its headquarters in Kingston, the bank has a robust presence in Barbados, the Cayman Islands and Trinidad and Tobago, particularly in private banking.

NCBJ provides tailored portfolios for wealthy clients along with a range of other offerings, including custodial and brokerage services, real estate planning, advice on philanthropy, retirement planning and daily management of regulatory and legal risks. It gives special attention to providing complex loans for investment, making NCBJ a notable financial partner for foreign investors and companies headquartered in the region.

Even before the pandemic struck, NCBJ was prioritizing investment in technology and innovation, allowing it to maintain close links with its wealthy clients after Covid-19 upended daily and working life. The bank had already upgraded its digital banking platform as part of a 17-year plan to build new technological architecture; and it had created 10 innovation labs that develop new tools to improve its connection with other sectors of the market, such as education.

“Technology is a key investment to make us more competitive and efficient,” says CEO Septimus Blake. “We need this infrastructure to connect the value chains, both domestic and abroad. The new normal is going to be digital.”

BEST PRIVATE BANK FOR ENTREPRENEURS

BUTTERFIELD

One of the largest Caribbean investment banks, with $118 billion in assets under management, Butterfield Bank has raised its income by $5.2 billion and increased average return for its wealthy clients by 1% over the previous 12 months. A 162-year-old Bermuda institution, it is also present in the Bahamas and the Cayman Islands. It provided private banking services for over 150 years.

Asset management services are the core of Butterfield’s private banking unit, which caters to entrepreneurs, corporate executives, medical professionals and other affluent clients. In a period of worldwide low interest rates, it is offering clients a larger range of real estate investments, including a proprietary asset management service. Butterfield’s private bankers work closely with the bank’s in-house asset managers to customize clients’ investment portfolio according to their objectives and risk tolerance. It also offers access to the bank’s full-service and self-directed commission-based brokerage capabilities.

Trust services are a complimentary feature for wealthy clients, for protection and intergenerational transfer of wealth. Butterfield’s clients in Bermuda and the Cayman Islands get flexible financing and direct access to the London property market through the bank’s UK subsidiary.

EXCELLENCE IN CRISIS: CLIENT SERVICES

RBC

Present in 17 countries and territories across the Caribbean, Royal Bank of Canada (RBC) has over 1 million clients in the region and is positioned as an elite wealth management provider for families and corporations, including multinationals. From its regional headquarters in Trinidad, RBC provides a wide array of investments through tax-efficient vehicles and pension plans. It also offers alternative services focusing on real estate, commercial opportunities and customized borrowing solutions.

Wealth succession strategy and advice on philanthropy have become especially notable RBC offerings since the Covid-19 pandemic hit. The bank has emphasized its deep connection to the people of the Caribbean with support and donations to hard-hit local communities.

“Across the region, we are seeing how NGOs and other organizations are stepping up to provide for those in need during these uncertain times,” said Rob Johnston, head of Caribbean banking, in a statement last April announcing a $330,000 donation to support food security. “We are proud to stand with these groups and to help support them in their vital work.”

Global Finance staff select winners for these awards based on entries submitted by banks, company documents and public filings. No proprietary information was sought or shared in the awards process. We consider local market knowledge, global footprint and investment breadth and sophistication. Because metrics are rarely public in this sensitive corner of finance, we incorporate perspective from analysts and consultants. Performance data are also drawn from industry sources including Scorpio Partnership’s annual Global Private Banking Benchmark and Asian Private Banker magazine’s regional league tables. Size and growth are a factor, but Global Finance also considered creativity, uniqueness of offering and dedication to private banking as a core business either globally or regionally.

BEST PRIVATE BANK IN LATIN AMERICA

Brazilian banks have been extending their private banking networks across Latin America, aiming to benefit from the gains the region’s richest have made even in a turbulent economic environment. BTG Pactual has been especially aggressive as it seeks to consolidate its position as one of the biggest players in Brazil, Argentina, Chile, Colombia, Peru and Mexico.

The 37-year-old investment bank’s objective is to triple its $41 billion in wealth management assets over the next three to five years. Besides the richest family accounts, it is targeting the business sector in Brazil, its Latin American neighbors and Portugal, the main refuge of many Brazilian millionaires.

This year, given the economic troubles in Brazil and the rest of Latin America, BTG overhauled the portfolio allocations of its multimarket, real estate and private debt funds. It also struck out in a new direction with the launch of impact investments targeting entrepreneurial businesses with social and environmental impact in Latin America and with Brazil’s first sustainable debenture, to finance a solar power company. The institution is prepared with other offerings in the sustainability sphere, including a reforestation fund.

BTG’s private banking clients get a tailor-made program that includes succession planning, access to vehicles for real estate alts and other illiquid sectors, and an additional service: changing of domicile to countries including Portugal, the US and the UK. And BTG has not ignored the need to build better digital communication with its clients. Since the beginning of the Covid-19 pandemic, which hit Brazil and Peru hard, it has invested some $30 million to improve its digital tools, especially their security and verification features.

BEST PRIVATE BANK FOR ENTREPRENEURS

ITAÚ PRIVATE BANK

The leading bank in Brazil, Itaú Unibanco has consolidated its position at home as the largest local provider of private banking services, with $304 billion in assets in its hands, giving it a 30.7% share of the market.

Results for the first half of 2020 were significantly positive in the context of the Covid-19 pandemic and the accompanying economic crisis. Private banking income rose 11%, and overall investment performance spiked by 21%. Like BTG Pactual, Itaú Unibanco is spreading its wings across Latin America, having established a strong presence in Chile, the Bahamas and Paraguay, as well as in Portugal, the US, Switzerland and other countries in the Americas and overseas.

Thanks to its long-time investment in innovative technologies and financial services, Itaú Unibanco is well placed to appeal to entrepreneurs. Easy access to its digital platforms, and an assortment of sustainable investment funds help attract new business. So did the bank’s 220 web conferences during the first half of 2020 with top government officers and financial experts, including Roberto Setubal, co-chairman of the board of directors.

“Itaú Unibanco’s private banking segment has the sophistication of a boutique investment bank,” says Luiz Severiano Ribeiro, global head of private banking. “It provides safety; a large range of investments, from fixed return options to the most sophisticated international funds; and credit access. We understand that every crisis gives opportunities to our clients, and we value our customers.”

BEST PRIVATE BANK FOR BUSINESS OWNERS

BRADESCO

A long-time private banking player, Bradesco focuses on managing the patrimonies of company founders as well as those of wealthy families. Most of its operations are devoted to serving Brazilian clients, making it the second largest private banking provider, with 22% of the local wealth management market. With three branches overseas—in New York, Luxemburg and the Cayman Islands—it offers clients an array of foreign investment options as well.

Bradesco has made two major movements to expand its wealth management sector. First, it signed an agreement to operate JP Morgan’s $4 billion of assets in Brazil. In parallel, it acquired the BAC Florida Bank, allowing it to operate in Miami, another refuge for wealthy Brazilian citizens and companies. Given Brazil’s economic crisis, Bradesco Asset Management recently offered its wealthy clients a new portfolio that invests in short-term plus assets that meet sustainability standards.

Investors from all corners of the world will present their bets during a Brazilian electric power transmission auction on December 17 amid high expectations and anxiety on the part of local authorities. It will be the first of five auctions in the energy sector scheduled until late 2022 that together should inject a total of $5.2 billion direct investment into the country’s infrastructure.

At stake in the December auction is the construction, operation, and maintenance of 16 new transmission lines and 12 substations located across nine Brazilian states. The concession will stand for 30 years. The Electric Energy National Agency (ANEEL) estimates that this initiative should generate $1.3 billion in investments and create more than 15,000 new jobs. ANEEL’s data register a 7.84% average return for similar investments in power transmission between 2016 and 2019.

Companies from Spain, France, China, India, Italy and Switzerland expressed interest in this auction and took part in an October 2019 conference in which the authorities outlined the projects’ details. ANEEL officials estimate that around 20% of auction participants will be foreign and that the auction will culiminate a live voice bidding war among competitors.

“Brazil has almost 176,000 megawatts of installed capacity, about 158,000 kilometers of transmission lines, and 85 million consumer units. Our goal is to increase consumers’ power of choice, ensure supply adequacy with high shares of clean sources and distributed energy resources and provide our system with new technologies and business models,” said Bento Albuquerque, Brazilian minister of Mines and Energy during the conference. “And there is another reason why 35% of the total foreign capital invested in Brazil in 2019 were concentrated in Mines and Energy: foreign investors and their long-term investments are treated with respect and equality in Brazil,” he added.

The December power transmission auction will be the first launched by the Brazilian government in 2020. The pandemic prevented another one scheduled for mid-year. Two auctions are planned for 2021 and two more for the last year of the Bolsonaro administration’s mandate. The winners will have between 42 and 60 months to conclude the infrastructure works, but if they finish the projects earlier, they will enhance their earnings.

“It is good business. Because of it, we want to attract more investors that are not yet placed in Brazil,” said André Patrus, executive-manager of ANEEL’s Executive Auctions Secretariat.

For the success of this particular goal, the Brazilian Trade and Investment Promotion Agency (Apex-Brasil) is offering to potential foreign investors a team of analysts, in partnership with ANEEL. According to Roberto Escoto, investment manager at Apex-Brasil, although foreign investments in the country fell by 30% as of October, in comparison with 2019 data, Brazil is still one of the top-ten global destinations for FDI and will remain more attractive than some European markets and the United States. Electric energy is one of the key sectors expected to increase foreign direct investments to $72 billion per year by 2022.

“As we transition to thinking about what comes next after the pandemic, the power sector is a key priority for Brazil because it is globally competitive. Just consider that, in 2019, it alone generated $4.6 billion in foreign direct investment”, said Escoto.

Since the first electric energy auction in 1999, Brazil has held 50 such events constituting a huge and permanently increasing bidding system operated by Eletrobras. Over 21 years, the bidding process has improved and so has investors confidence in the legal certainty of the auctions. Patrus explained that the demand for electric power is constantly rising in Brazil and the system that provides it should always be strengthened. “The system itself is a robust vector of investments in other sectors,” he concluded.

In a country where environmental protection became a key issue for investors and more than 80% of the electric energy is renewable, ANEEL reminds winners of this auction that they will have obligation to comply with Brazilian legislation and the demands of environmental agencies. They also must respect the rules concerning the traditional and indigenous communities’ lands. Among the nine states to be crossed by new lines are Amazonas and Mato Grosso do Sul—both of which contain native forests devastated by wildfires. “The winner will have to adopt the correct decisions on these issues and must have conditions to do that,” said Patrus.

The performance of this auction could gauge global energy sector interest in a more ambitious bid—the privatization of Eletrobras, the major Latin American electric power company. Despite the two years delay in its launch, the sale of Eletrobras could be an important way to reduce the huge and growing public debt.