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Lion of Panama: HSBC's Joseph Salterio
Latin CEO / June 2001

By Larry Luxner

Two fierce-looking bronze lions guard the entrance to HSBC's Panama City headquarters. In keeping with Chinese legend, they were put there to protect the bank's assets and assure the success of its operations.

Apparently, the lions have fulfilled their mission. But not without help from Joseph L. Salterio, under whose leadership HSBC (formerly Hongkong & Shanghai Bank) has survived a trade embargo, freezing of assets, political chaos and finally the 1989 U.S. invasion, ultimately emerging as one of the strongest financial institutions in the country.

"Our perception was that the Noriega regime wouldn't last long. We knew that the United States would intervene to safeguard its interests," said Salterio. "We decided to select the best companies in Panama, locals as well as multinationals, and give them credit facilities. We were going totally against the current. Everybody was pulling out, and we were going forward."

Today, HSBC is Panama's third-largest bank (after Banco del Istmo and Banco General) and its No. 1 foreign commercial bank, with assets of around $1.7 billion -- up from only $230 million a decade ago.

A big chunk of that growth came last year, with HSBC's acquisition of Chase Manhattan's Panamanian operations. Salterio wouldn't disclose how much the transaction cost HSBC, which added 12 branches and about $800 million in Chase assets to its Panama portfolio.

The deal came on the heels of several other big M&As, including Banco del Istmo's takeover of Pribanco and Grupo BBVA's acquisition of Banco Exterior.

"We're seeing a process of mergers and acquisitions, with bigger and stronger banks being formed," said Salterio. "It's a consolidation of the Panamanian banking system. I think this is good for Panama. The stronger the banks are, the more they can compete."

Salterio said HSBC -- which also has operations in Argentina, Brazil and Mexico -- now has 700 employees in 17 branches throughout Panama. In 2000, it reported $3.4 million in after-tax profits, a number he expects to jump to $25 million this year.

A big part of HSBC's business comes from the Colón Free Zone, which sits at the Atlantic entrance to the Panama Canal and annually re-exports billions of dollars worth of electronics, fashions and luxury goods from the Far East and elsewhere to customers throughout Latin America and the Caribbean.

"Panama is rapidly becoming the Singapore of the Americas," Salterio said. "We're the No. 1 institution financing the Colón Free Zone, because of our ability to carry out fast and efficient business with the Orient. As a result, we're the bank of choice for free-zone operations."

Yet an economic crisis in Colombia -- the zone's biggest trading partner -- has forced larger companies to adapt by shifting operations to places like Brazil. Last year, the sales slump put some smaller traders out of business, while forcing domestic carrier Aeroperlas to cancel more than half of its daily flights between Panama City and Colón.

Although the zone is starting to recover, some are concerned that a proposed Free Trade Area of the Americas would make the Colón Free Zone obsolete altogether.

Not to worry, says Salterio.

"The free zone adds a very interesting operation for Latin American executives," he said. "With one stop, they can buy goods from all over the world without having to incur the expense of traveling to each country. Companies in the free zone have gotten so big that their purchasing power enables them to offer better prices, which they then pass onto their customers."

Salterio, 56, never intended to be a banker. Born and raised in Panama, he graduated from Texas A&M University with a degree in agriculture production and was soon hired by Chase Manhattan as a farm credit analyst. In 1973, he joined Marine Midland Bank (MMB) -- which was ultimately taken over by Hongkong & Shanghai Bank, later HSBC.

Salterio says his biggest competitors aren't local banks, but multinational giants like Citibank, Scotiabank and Banco de Boston.

"Panama is not a large country, so you have to compete. We're spending a very substantial amount of money on advertising," he said without elaborating. "The drop in U.S. interest rates has helped Panama, enabling the government to service its debts at a lower rate. Anything the U.S. does to help its economy helps Panama too."

Any interview with a Panamanian banker sooner or later turns to money-laundering, which Salterio readily acknowledges is a big issue worldwide.

"Everybody is completely against it," he says. "Our government has placed many sorts of controls, very stringent laws -- much more than the United States. In my opinion, Panama is doing its best to control this problem."

For all its difficulties, Salterio says Panama has a bright future, which bodes well for HSBC and the lions that guard it.

"Fortunately, the economies of Asia are improving, and Panama has the flexibility to do business all around the world," said the banker. "Meanwhile, we've focused on becoming the trusted financial advisor to our customers, with a focus on customer satisfaction. That's our main priority. We believe that makes all the difference."

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