Big lender bets USD2.2 Bn on Chile

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Toronto-based Scotiabank has moved to reinforce its offering to borrowers around the Chilean salmon-farming scene by acquiring a controlling stake in BBVA Chile, a top aquaculture lender and a business of Banco Bilbao Vizcaya Argentaria.

The Canadians said they paid USD2.2 billion for a 68-percent slice of BBVA Chile, a leading lender to Chile’s now fully recovered aquaculture establishment. BBVA, the parent, is one of South America’s largest lenders, and its Chilean unit, now largely in Canadian hands, “is focused on high-growth markets” where technology offers a competitive advantage.

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Technology and a changed financial situation make Chilean farmers attractive banking customers again. They’ve paid up in full for tens of millions loaned over a decade.

“These changes have also lead to a much-improved perception of the industry among investors and the banks,” wrote the authors of World Bank report, The Recovery of the Chilean Salmon Industry. It was a reminder to investors that, “Banks played a critical role in the industry expansion that preceded the ISA epidemic.”

Chilean lending rates to fish-farmers and individuals have been falling of late, but rates have been cut much less than in nearby Colombia or Argentina. Parent BBVA said Chilean lending is up 5 percent in 2017, and BBVA Chile earned EUR 316 million in 2017, up 27 percent over the same January-to-September period in 2016.

After the credit crunch of 2018, Scotiabank moved in to the U.S. banking market, acquiring a number of U.S. banks and their South American subsidiaries. Canada’s second-largest bank has had a Chilean presence in Scotiabank Chile since a wave of acquisitions from 2007 that only recently slowed. Management in Toronto intend to merge Scotiabank Chile with BBVA Chile, and a tight-fisted Canadian “risk culture” is expected to be implemented, a nod to the possibility of stricter, rather than more generous, industry lending.

Whatever it means, Chilean salmon-farmers that have looked to raising capital and co-finance with government now have a new lender on hand. The consensus of industry watchers SalmonBusiness has spoken to say the Chilean industry has made huge strides to pay off vast debt and could be ready for new loans.

While we found no pre-2012 lending numbers, salmon farming companies and their suppliers in 2009 owed the banks a total USD 4 billion, the report said.

“Cumulative debt of the farming companies was about half of this and individual companies were indebted in amounts up to USD 380 million. Clearly, without access to this financing, the industry would not have been able to expand as it did.”

It’s 2017. Enter Scotiabank.