New York Times | By Simon Romero | Nov. 17, 2003
MIAMI, Nov. 16 - Glancing at the skyline along Brickell Avenue in Miami's financial district, this city's international banking industry seems anything but sickly. Developers even recently completed a 70-story skyscraper, the nation's tallest building south of Atlanta, with a 2,000-pound nude by the Colombian sculptor Fernando Botero in its lobby.
But sluggishness in South America's largest economy, Brazil, and debilitating financial crises in the continent's second- and third-largest economies, Argentina and Venezuela, have taken their toll on Miami's once-vibrant international banking industry. Deposits, assets and jobs have plummeted at the banks, which have traditionally been a relative haven for investments by wealthy Latin Americans.
But Miami's bankers say that a recovery may be at hand. They are quietly pinning their hopes for a rebound on the establishment of the Free Trade Area of the Americas, an arrangement intended to reduce tariffs on imports throughout the hemisphere. Trade ministers from 34 countries are meeting here this week for talks aimed at creating the free trade area by 2005.
The negotiators will also be discussing where to establish the headquarters of the Free Trade Area of the Americas, a prize that Miami is pursuing with at least a half-dozen other cities from the Western Hemisphere, including Atlanta and Panama City. Economists have estimated that establishing the headquarters would create 15,000 jobs for white-collar professionals including diplomats, lawyers and accountants, in the host city.
"That kind of throughput of new professionals would generate phenomenal demand for financial services in Miami," said Thomas P. Noonan, president of the Florida International Bankers Association and chief executive of BAC Florida Bank, an institution with strong ties to several Central American banks.
Still, the formation of an Americas-wide trade agreement remains uncertain, mired in protracted disagreements, mainly between the United States and Brazil, over tariffs on agricultural products, like oranges and sugar, and differences on barriers to investment in areas including financial services and software licensing.
Miami, meanwhile, is struggling to rebuild its international banking industry, now in the fifth year of a slump. Since 1998, the number of foreign banks with agencies in Miami has dwindled to 36 from 42, while the number of representative offices has fallen to 15 from 20. Total assets held in foreign banks in Miami have declined to $14.5 billion from $20 billion five years ago, said David N. Devick, a financial control analyst at Florida's Office of Financial Regulation in Tallahassee. Loans at the Miami branches of foreign banks declined about 20 percent, to $3.8 billion from $4.7 billion, in the 12 months ended June 30.
As business withered, so did payrolls: foreign banks employed 1,065 people as of June 2003, down 21 percent from a year earlier and 39 percent from 1998.
The decline in foreign banking activity is partly related to consolidation in the financial services industry. Barclays, once one of the Miami's largest foreign banks, last year sold its Latin American private banking business to the Royal Bank of Canada and shifted its investment banking operations in Miami to New York. Dresdner, a large German bank, recently closed its Latin American corporate banking operations in Miami, as did Standard Chartered, a British bank.
Other factors are also responsible. Latin Americans have been hesitant to deposit cash in interest-bearing accounts in Miami when American rates are near an all-time low and regulators in some countries - like El Salvador, Panama and Ecuador - allow investors to hold dollar-denominated accounts with higher rates of return, said David Konfino, president of the international division of Union Planters Bank, a Memphis institution with a large office in Miami.
A sizzling real estate market in South Florida, also spurred by low rates, has convinced many foreign investors to invest in property instead of securities. Then there is uncertainty over growth prospects in Latin America. Despite hopes for stronger economies in Brazil and Argentina, demand for services like trade finance and merger and acquisition advice remains relatively weak, executives at several banks here said.
Still, bank executives and analysts said they hope that a hemisphere-wide trade agreement would change that by encouraging cross-border mergers and trade. Some bankers here say they are encouraged by the recent decisions of relatively small banks like Banco Pastor and Caixanova, both of Spain, to open agencies in Miami.
"We get one or two contacts each month from banks sounding out a Miami presence," said Raul Valdes-Fauli, who is in charge of the banking practice at Steel Hector & Davis, a large law firm here.
Still, there is the concern that another city, especially one with a strong offshore banking industry like that in Panama City, could snare the Free Trade Area of the Americas headquarters, prompting some here to ponder the apparent bullishness of Miami's skyline.
"Crane activity is still strong along Brickell, which at least shows that there's a vision we'll move beyond the bust," said Kenneth Thomson, an independent banking consultant in Miami who also teaches at the Wharton School of the University of Pennsylvania. "Nothing could be more crucial for this hope than seeing the F.T.A.A. headquarters to fruition."New York Times:
