Banking In Argentina
Banking on Argentina
Background: London based HSBC derives its name from its founding members, the Hong Kong and Shanghai Banking Corporation Limited was established in 1865 and it permitted trading between China and Europe. After World War II HSBC expanded and diversified its business into Canada, Australia, and the United States; and in the 1990’s expanding further into Brazil and Argentina. HSBC entered into Argentina in 1997 because their GDP had just grown by 6.1% in the last 6 years. Little did they know that Argentina was about to fall into recession. Now HSBC has to rethink loans and decide if the political and economic instability of the country was worth the risk of continued operations.
Issue: Should HSBC move out of Argentina?
Analysis:
Yes 1: HSBC lost a total of $1.1 billion in 2001 because of Argentina’s problems. They started losing money once they entered Argentina, and that is never a good sign of a place being good for business.
Yes 2: Argentina is a relatively small market compared with faster growing markets in Asia, including Hong Kong and China. They would make more revenue if they leave Argentina and stay in Asia.
Yes 3: Argentina was burdened by its huge debt to private creditors and the IMF. Though they paid off the $9.8 billion they still have several other debts including $9 billion owed to the Paris Club of creditor nations. Argentina has a lot of debt; that should be a sign for HSBC to move out of Argentina.
No 1: HSBC reported that a strong rebound in industrial production and increased export of motor vehicles to Brazil has led to a 7.5% increase in GDP in Argentina. They are showing signs of getting better. It’s not going to be fast or easy but Argentina is showing hopes of staying afloat.
No 2: There are higher sales in Argentina, and improved margins due to repricing initiatives. Argentina’s economy is in a little
Background: London based HSBC derives its name from its founding members, the Hong Kong and Shanghai Banking Corporation Limited was established in 1865 and it permitted trading between China and Europe. After World War II HSBC expanded and diversified its business into Canada, Australia, and the United States; and in the 1990’s expanding further into Brazil and Argentina. HSBC entered into Argentina in 1997 because their GDP had just grown by 6.1% in the last 6 years. Little did they know that Argentina was about to fall into recession. Now HSBC has to rethink loans and decide if the political and economic instability of the country was worth the risk of continued operations.
Issue: Should HSBC move out of Argentina?
Analysis:
Yes 1: HSBC lost a total of $1.1 billion in 2001 because of Argentina’s problems. They started losing money once they entered Argentina, and that is never a good sign of a place being good for business.
Yes 2: Argentina is a relatively small market compared with faster growing markets in Asia, including Hong Kong and China. They would make more revenue if they leave Argentina and stay in Asia.
Yes 3: Argentina was burdened by its huge debt to private creditors and the IMF. Though they paid off the $9.8 billion they still have several other debts including $9 billion owed to the Paris Club of creditor nations. Argentina has a lot of debt; that should be a sign for HSBC to move out of Argentina.
No 1: HSBC reported that a strong rebound in industrial production and increased export of motor vehicles to Brazil has led to a 7.5% increase in GDP in Argentina. They are showing signs of getting better. It’s not going to be fast or easy but Argentina is showing hopes of staying afloat.
No 2: There are higher sales in Argentina, and improved margins due to repricing initiatives. Argentina’s economy is in a little