by Shahrokh Moinian, Managing Director and Head of Trade Finance and Cash Management Corporates Americas, Global Transaction Banking, Deutsche Bank
Five or six years ago, trade finance was becoming increasingly unfashionable. Articles discussed the decline of trade finance in favour of open account while most conversations around emerging markets focused on BRIC (Brazil, Russia, India, China) primarily for low-cost sourcing and commodities. The idea of the financial supply chain was largely conceptual and alternative financing techniques were often relegated to smaller companies. In only five years, we have seen a transformation in the global business environment and consequently, the way that corporations do business. Treasurers have become increasingly proactive and pragmatic in the way that they manage credit and liquidity risk and support the business in building its international footprint. As part of this transformation, trade finance has become an essential tool for treasurers, a trend that is set to continue in 2013 and beyond.
From single track to super highway
Latin America, particularly Brazil as the largest economy in the region, has experienced a volatile few years. In 2007 and 2008, Brazil’s economy was growing rapidly, the country had become a net creditor and its rating was increased. The 2008-9 financial crisis hit the region hard, not least due to its reliance on commodity-based trade with North America and Europe, which declined sharply. Brazil was one of the first economies to experience recovery in 2010, but something had changed.
South-south trade routes that had been narrow and bumpy before the crisis are now becoming the trade superhighways