BUENOS AIRES -- Spain took another step forward in its push to play a dominant role in Latin America's emerging banking, pension and investment sectors.
Spanish banking group Argentaria announced April 7 its purchase of a 50% stake in Argentina's Siembra Group from Citibank NA.
The $280 million investment in Siembra, which includes the Siembra AFJP private pension fund, has given Spanish entities Santander Investment, Banco Bilbao Vizcaya and Argentaria influential positions in three of Argentina's four largest private pension funds. Santander and Banco de la Provincia de Buenos Aires both hold 50% stakes in Origenes AFJP. BBV controls two-thirds of Consolidar AFJP, following its purchase of majority stakes in Banco de Credito Argentino and Banco Frances in 1997.
Only Maxima, Argentina's largest administradora de fondos de jubilaciones y pensiones, with $1.62 billion under management, remains outside Spain's grip. It is controlled by local entities owned by ScotiaBank, HSBC Holdings and New York Life.
Pension funds in Argentina have become prime targets for foreign companies looking to overcome two major headaches: identifying the needs of particular blocks of the citizenry and building a distribution base to get the products to their target audience. Siembra AFJP has 450,000 paid-up members (870,000 are registered) and a sales force of 2,500 that already has begun offering the range of Siembra products as well as local Citibank mutual funds.
The purchase didn't just include the pension fund and its $1.42 billion in assets: other entities belonging to the Siembra Group are Siembra Retiro, a provider of supplemental retirement income products with $460 million under management; and Sur Seguros de Vida, a life insurance company with $67 million in assets.
For its part, Argentaria has expressed interest in acquiring an Argentine commercial bank in order to offer consumer credit products such as personal loans, mortgages and credit cards, or even prepaid medical plans. Argentaria's Spanish banking group, consisting of six entities now being consolidated, ranks third in assets in Spain. It also runs a $2 billion pension fund business with 250,000 members.
The bank's other activities in Latin America include another partnership with Citibank, this time in the administration of the pension fund Colfondos in Colombia. In Bolivia, it participated early in 1997 in a consortium with INVESCO PLC that was awarded rights to manage that country's newly created private pension fund.
Although it held 100% of Siembra, Citibank was eager to sell off the 50% of the company that it was forced to buy back when its former partner, the local Banco Rio de la Plata, was swallowed up by Santander in September 1997.
Local regulations prevented Santander, already a partner in Origenes AFJP, from becoming a shareholder in a second pension fund.
In any event, the operation proved lucrative for Citibank: it bought the stake from Santander for $235 million and six months later sold it to Argentaria for $280 million.
Analysts were at a loss to predict the implications that the announced merger between Citibank and Traveler's Group would have on Citibank's recently expanded Latin activities.
For some analysts, the fact that the two deals have been announced days apart signals that the strengthened Citibank would look to join forces with other influential entities in the region instead of fighting with them.
Others predicted Citibank would end up losing ground as a result of the distractions, delays and uncertainties caused by the merger.
