Why are you visiting Chile and Brazil?
Lord Mayor: Chile, from a financial services point of view, is a really interesting market for us. It’s very sophisticated compared to other Latin American markets and we have developed strong relationships with Chilean financial institutions. We know them very well as they come every year for Chile Day, indeed I opened Chile Day in September 2021 at Mansion House. So, you have a well-established relationship, combined with the potential for business that Chile’s strong financial services market offers.
Brazil is clearly a bigger market with a larger economy. For example, bilateral trade with Chile is worth around £1.4billion, whereas with Brazil it is around £6billion. The untapped potential in the Brazilian financial market is huge. During my trip I will meet with the large established Brazilian financial service outfits, many of whom already have a presence in London. So, we will be looking at how we can deepen the relationship. We want to encourage a two-way flow of talent, money and expertise flowing between the two countries.
Does Brexit reduce London’s appeal as a European base for Latin American banks?
LM: We’ve seen that all the foreign financial institutions based in the UK have had to take steps with their legal structures to ensure that they can continue doing business in Europe from London. At the time, these steps involved some additional cost and complexity but now they are complete, the international banks can carry on working in Europe from London without impediment. The fundamental attractions of London remain as strong as ever and I don’t doubt that the Latin American financial institutions realise that and will continue to use London as a financial gateway, as they have in the past.
Will you be encouraging UK trade deals with Mercosur or the Pacific Alliance?
LM: I will be speaking very positively in Brazil about the UK-Mercosur FTA. I know that the UK is very committed and keen to see that deal get done. Of course, these are complicated agreements that take years to negotiate, especially at the UK is engaged in similar negotiations around the world. The other big potential trade deal would be for the UK to join the CPTTP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership). That is something that I raised in my trip to Mexico, in February, and I am sure it will come up in Chile. We like the Pacific Alliance grouping because those economies are very open and keen to work with international investors. The main purpose of these visits is to improve bilateral relations and build upon the existing business ties.
Where are the opportunities in Latin America for UK firms?
LM: The UK has an incredibly strong offer in green finance and innovative financial technology, such as fintech. They are the two themes that we centre much of our work on and there is quite a lot of intersections between the two. Fortunately, these are also themes that resonate in Latin America and they will form the basis of most of my meetings and discussions in both Chile and Brazil. Green finance and financial innovation are important for both the UK and Latin America.
The idea of these trips is to showcase what the UK can offer and also learn about the opportunities in these exciting markets. Like I say, our goal is to get a two-way flow of ideas and capital. In an ideal world I would bring a business delegation with me to Chile and Brazil. Obviously, the pandemic halted business delegations but I am optimistic that in future trips to the region I will be able to bring London financiers with me.
The UK’s fintech offering is world-beating. Indeed, in Brazil I will speak to three British fintech firms that are already established in the country. Fintech gives us the chance to reengineer the financial system. Take Brazil, for example, where there are still lots of unbanked citizens, fintech allows us to improve financial inclusivity.
We are also incredibly strong in green finance. The recent ZEN survey of global financial centres ranked London as number one for green and sustainable finance.
What challenges prevent UK financial firms from exploiting Latin America’s potential?
LM: One issue is regulation. So, during the trip I will speak to local banking regulators and finance ministers to convince them of the benefits of opening up to international fintech solutions. Generally, I find these regulators are very receptive to the ideas because they see the social problems and challenges in their countries and realise that fintech can help. The great thing is that almost everyone in Latin America now has a mobile phone, so it’s easy to get this world-beating financial technology straight to the people who need it. Chile in particular is very receptive to fintech.
Part of the problem, is perhaps that the UK financial sector had taken its eye of the ball and missed out on good opportunities in Latin America. However, I am please to say that is now changing with firms being much more aggressive about seizing opportunities in the region.
Another challenge, with regards to green finance, is finding investable projects. We have the Climate Finance Development Initiative (CFDI) that we started in India but are now rolling out in Colombia. The idea is to bring available capital to investable projects. London has the financial acumen and the capital so we need to deploy that to green projects in Latin America. If the world is going to get to Net Zero by 2050 then developing economies will need to see enormous inflows of capital.
One challenge is that the development banks, which do great work, sometimes crowd out private finance. They don’t allow enough return in the deal to attract private finance. We need to work with them to see how they can structure deals that attract private finance into Latin America, instead of competing with it.