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Introduction

Investing Outside the Region (Outward FDI ) July 2011 Atlantic Connection Economic and Financial Development Conference. Introduction. Replacing Vera (WB). Privileged. A2F Consulting (Access to Finance) (DC based) Financial Sectors in EM – Stability / Development

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Introduction

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  1. Investing Outside the Region (Outward FDI)July 2011 Atlantic ConnectionEconomic and Financial Development Conference

  2. Introduction • Replacing Vera (WB). Privileged. • A2F Consulting (Access to Finance) (DC based) • Financial Sectors in EM – Stability / Development • Microfinance / SME (where also investors in Africa) • Alfredo • 20+ years, Banking crisis, Strategic fin. sector perspective • Own Caribbean credentials? Venezuela, Curacao, Dom Rep. • Different global perspective – and guide discussion

  3. Outward FDI: What are we talking about? Key Focus – Based on Participants Institutional Inv. (Public) Also relevant – But will leave until later Institutional Inv. (Private) Corporates Outside of the Region Outside of the Country

  4. A Hugely Diverse Region … Very wide range of: • Physical size • Population • Languages • Mineral resources • Wealth (GDP per capita) !!

  5. But Some Common Themes … • Generally very small (island) states • Similar (though complex!) heritage • Managed to reduce dependency on agriculture - • Tourism • Financial Services • Large populations out of country • Very open economies (good, but also exposed) • [US/Europe centric] • Hit by the recent crisis • Exposed to natural disasters • Generally high levels of country debt

  6. And on natural disasters … “The country I’m from, St. Lucia, has 160,000 people. The cost of government per capita is very high; the markets are very small; and the cost of production is very high. Also every year we have a hurricane season, which can destroy the country’s GDP. In some countries, it can also lead to high debt levels. Their infrastructure is destroyed before they paid for it, so they borrow again. Then it is destroyed a second, and sometimes even a third time”. - Sir K. Dwight Venner (Governor, ECCB)

  7. Clearly an overwhelming case … Manage Risks Diversify Investment (Invest outside the country, and region)

  8. But the reality is not so simple… But, who are talking about (state employee pension funds, social security funds, or similar). And, countries in debt, development gap, [unfunded schemes?], fiscally tight, crisis, government priorities. Clearly not a “textbook” pension fund investmentissue • Political • [As well as Legal/regulatory regulatory restrictions]

  9. Is Pragmatic Evolutionpossible? Yesterday’s discussion (CARICOM MOU) seems to create a path: • Potentially both a technicalandpolitical tool • “Reserves” vs. “Resources” discussion insightful (both valid) • But getting started is never simple … Interesting ideas were mentioned, which taken a little further?: • Create specifically investible vehicle(s)? • A “Menu” (of at least 2?) funds, allowing investors to choose? • Potentially bring in other (institutional) investors to help kick start the product, create scale, and validate governance? “Private sector type” solution: allowing to “pick” – and with less political risks

  10. In summary … • “No brainer” investment case for risk diversification • Butis this is not just an investment issue • Political / financial • [This is not good or bad, just a reality] • But can continue steps in the right direction (“MOU”)

  11. But back to the bigger picture … Public / semi-public pension schemes work best when they are is a “rich” / “deep” market setting Institutional Inv. (Public) Are these relevant? Institutional Inv. (Private) Do (local) private institutional investors have a role to play? Do we have corporates with a regional / international story? Corporates Out of Region Out of Country

  12. Need to deepen the local markets International (Global) Business • Leading global off-shore centers Big gap between the “country club” and the “back-streets”!! Local Markets • But local markets not developed

  13. Building the future … Need to change a bit the perspective: • The “Caribbean” is an extraordinary global brand • “South-South” successes provide inspiration • Need to look more broadly for models and markets • Need to find your own (Caribbean) solutions • Local success models can (and need to be) scaled • Working as a region (not easy!) provides strength The challenges will not disappear – But they can be managed

  14. Final message … Would encourage you: • To continue the path opening outward foreign investment (by the local pension funds) • To support broader local financial deepening Thank You !!!

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