Latin groove: harnessing financial power

In late May, Citicorp awoke from its decade-long slumber in Latin America by pouncing on Mexico’s Banacci-Accival with a US$12.5 billion offer. Now, as the company looks for another major banking acquisition in Brazil (“It is just a question of which bank will exactly fit into our regional strategy,” says a top Citibank executive), it is set to reclaim the mantle of Latin America’s leading financial institution from Spain’s Banco Bilbao Vizcaya Argentaria.

Central to Citibank’s strategy is harnessing the financial power of the United States’ enormous Latin American community. Mexico and Brazil are the region’s two largest economies. They also are the two countries that receive the most money from their nationals living in the United States.

Now Citibank has decided to employ the technological expertise it has learned doing Internet banking in the States, deploying a cutting-edge online platform throughout the region. That will help relaunch the bank’s image as a tech powerhouse and, more important, it should help Citibank exploit its clearest advantage over its main competitors in the region: the ability to link the United States and Latin American banking markets.

Hispanics living in the United States sent $23 billion to their home countries last year, with $8 billion going to Mexico and $3 billion to Brazil. This cash has become so important to Latin America that the Inter-American Development Bank is exploring ways to ease the flow by lowering the commissions charged on those transactions. Currently, each wire transfer generates on average $25 in commissions and processing fees – that’s $3 billion that could be fueling regional economies.

Citibank’s online platform is ready to handle these international transfers for only $10 to $15 a pop. All it needs to do to collect those fees is link its U.S. operations with its acquisitions in Mexico and, eventually, Brazil.

Citibank has historically been known for its strong worldwide payment infrastructure, which lets its corporate customers wire money in more than 70 currencies around the globe. With the Banacci deal, Citibank will be able to reach into the farthest corners of Mexico. “We expect to leverage all our capabilities to service the cross-border retail sector,” says Leo Salom, Citibank Latin America’s managing director for consumer Internet operations.

Banacci has the largest banking network in Mexico, and a Mexican Citibank client living in, say, Chicago would be able to wire money to his family in the remote town of Zacatl