Seis Continentes / Spring 2002
By Larry Luxner
SÃO PAULO -- On Feb. 23, 1915, the National City Bank of New York opened its first branch in Brazil with exactly $1 million in capital. The two-story building, with 30 employees, dominated the corner of Avenida Rio Branco and Rua da Alfândega, in the heart of Brazil's then-capital city, Rio de Janeiro. That same month, a second branch opened in the port city of Santos.
Today, 86 years later, Citibank is still in Brazil -- only its headquarters is now a 17-story glass skyscraper towering over the heart of São Paulo's financial district. The bank, with 2,324 employees scattered among 35 branches across the country, today ranks eighth among private-sector financial institutions in Brazil, with local assets of $7 billion, and fourth in terms of profitability.
It also tops the list in syndicated loans, with $2.664 billion reported in the first nine months of 2001. During that same period, Citibank ranked second in mergers and acquisitions ($4.549 billion), trailing only J.P. Morgan, and second in equities ($807 million), behind only Morgan Stanley.
And while other banks may be larger in consumer business, Citibank has clearly taken the lead in blue-chip business.
"We are focused on big corporate names. In that market segment, we are the largest," says Gustavo Marín, president and CEO of Citibank Brazil. "You take the 1,000 largest companies in Brazil, they're all our customers."
Marín, 43, was born in the Uruguayan town of Colonia and started his career with Citibank in 1981, while still an economics major at the Universidad de la República Oriental del Uruguay in Montevideo. In 1993, he was promoted to president of Citibank Paraguay, spending three years in Asunción, where he was also president of the Paraguayan Banking Association.
In 1996, after helping Citibank become the largest financial institution in Paraguay, the New York-based multinational sent him to Lima to head the bank's Peruvian operations, which had suffered badly during the country's financial and political collapse in the 1980s.
"We were the only foreign bank that still had offices in Peru," Marín told Seis Continentes in a recent interview. "At the minimum, we had 13 employees. We ended up being one of the largest corporate banks in the country."
Marín did his job so well that three years ago, Citibank transferred him from Lima to São Paulo to head its corporate investment banking business. Last July, he was promoted to president of Citibank Brazil, replacing Alcides de S. Aramal.
From his 17th-floor office, the banking executive looks out at the Inter-Continental São Paulo directly across the street on Rua Alameda Santos. He also has a sweeping view of the city's financial district and Avenida Paulista, the wide boulevard that's lined with the towering headquarters of many of Citibank's major competitors, including Bradesco, Santander, Unibanco, Itau, HSBC and BankBoston.
"Why has Citibank been in this country for 86 years," he mused, "while our competitors have come and gone? Because Citibank has achieved this unique combination of local expertise and commitment to the market. One thing feeds into the other. That provides the results.
"Citibank played a leading financial role in the Brazilian miracle of the 1970s. We were behind major projects from the Itaipú hydroelectric dam to Telebrás," he said. "When the devaluation took place, we saw that as an opportunity. When all our competitors were running away, we increased our commitment to the country, and cross-border exposure to Brazil. We knew that this was an opportunity to get new customers."
In fact, more than a dozen M&A announcements embedded in lucite line Marin's office shelves, many of them attesting to the largest corporate takeovers in recent Brazilian history; these include the acquisition of mining giant Voltarantim by a U.S. company, Blue Circle, and the takeover of petrochemical producer Copene by São Paulo-based construction conglomerate Odebrecht.
"We have a very solid business," Marín told us, estimating that Citibank has a 5.8% share of the Brazilian wholesale banking market and around 2% of the total market. "It's not concentrated in specific products or consumers, but spread out among different products and a broad array of customers. That has given us stability over the years."
Marín, citing results of an independent survey, claims Citibank enjoys an 82% customer satisfaction rate, which he says represents a 35% lead over the competition. In addition, Citibank was named by Exame in 2001 as one of the 100 best companies to work for in Brazil.
The magazine praised the bank's generous compensation packages and noted that the bank offers more opportunities than nearly any other company for employee advancement and the chance to work overseas. According to Exame, Citibank's 504 directors and managers earn an average of R$19,273 a month in salary and benefits, while the remaining 1,820 employees earn an average R$3,712 in monthly remuneration. To further encourage its employees, the bank also pays up to 70% of the tuition toward MBAs, post-graduate degrees and English-language courses, and in some cases pays 100% of such costs.
"Our biggest challenge is maintaining our ability to attract and retain the best people. Citibank is the employer of choice in the Brazilian market. All my officers are bilingual," he said. "The second challenge is to keep our focus on innovation. In such a competitive marketplace, you always have to be on top."
Asked if his experience in little countries like Uruguay and Paraguay have helped him in vastly bigger Brazil, Marín says: "It was my training that got me here. Problems are the same everywhere -- like bad loans and dealing with the government. You just have to add a couple of zeroes."
Yet the banking executive, who speaks English, Spanish and Portuguese fluently, insists that the fact he's not Brazilian has not hindered him in any way at Citibank.
"This is, by definition, a job occupied by international staff," he said. "If you look at the rest of Latin America, in Argentina we have an American, in Uruguay we have an Argentine, in Paraguay we have a Chilean, in Peru we have a Puerto Rican. And in Brazil, we have a Uruguayan. That's how we do business in these markets."
Citibank's largest customers in Brazil include all the "big guys" -- Petrobrás, General Motors, Fiat, BCP and Telefónica. In addition, Citibank, in partnership with Itau and Unibanco, owns Credicard, the nation's largest credit-card issuer, with a 35% market share. At the moment, Credicard has six million cardholders; another 400,000 Brazilians have Citibank Visa or MasterCard accounts.
"This is the bulk of our business, though we are expanding into other businesses," says Marín. "We are very strong players in the A and B consumer market -- people who make more than $1,000 a month -- and we're now expanding into the middle market."
Yet Marín stresses the importance of personal contacts in an industry such as banking.
"You must know exactly whom you're dealing with, i.e., I will accept money from this person, but not that one," he said. "You have to know all your customers. Otherwise, you'll get into trouble. This is our main line of defense against credit and money-laundering problems."
Another problem Citibank faces is the continuing economic crisis in neighboring Argentina, though Marín insists that the recent problems sparked by rising unemployment -- which culminated in late December with deadly street riots and the subsequent resignation of President Fernando de la Rúa -- will have little effect on Brazil.
"The markets have given their verdict. In spite of Argentina, Brazil has gone the other way around," he claims. "It's a different ball game here. The economic fundamentals are much stronger. Brazil is running a fiscal surplus of almost 3% of GDP, and that has been the cornerstone of Brazil's performance agreement with the International Monetary Fund."
Marín concedes that Mercosur -- the customs union officially linking Argentina, Brazil, Paraguay and Uruguay -- has been badly strained by differences between the four member nations.
"When you have such different macroeconomic policies, that creates a lot of stress in the system. Those have not been sorted out, and the current situation in Argentina doesn't help. Argentina is fighting hard to defend the convertibility of its currency "
Marín adds: "We are going to be in the forefront of helping Argentina restore its financial health. We will continue being a leading player in both good times and bad."
As far as Brazil is concerned, Marín says the country's so-called "confidence index" is rising, and that the average interest rate, now at 19%, will begin falling soon.
"When you reduce interest rates, economic activity booms. If you add to that the return of international liquidity, it means there's a lot of money looking for good investment opportunities," he said, adding that he's optimistic about Brazil's short-term future.
"Remember that just a few months ago, our exchange rate was 2.85 to the dollar. Now we're at 2.33," says the banker. "The forecast for rainfall is 20% better than average, so it looks like the energy restrictions will likely be lifted by March or April of next year. And the decoupling of regional problems will allow the government to reduce interest rates, which will boost economic activity. So what was looking like a poor situation for 2002 may in fact be very good."