Oct 09, 2013
Lima, October 7th 2013 - Citi Peru announced the issue of the first letter of credit denominated in Renminbi (RMB), the currency used in the Chinese market, more commonly known as the Yuan. Thanks to the letter of credit, an important bank client in the retail sector was able to significantly improve conditions for its imports.
Citi Peru is the first bank in Latin America to issue letters of credit in RMB. “Our mission as a financial institution is to offer specialized, added-value financial solutions, and to this end we took the step of becoming the first to issue letters of credit in this currency. This is a way for us to offer added benefits to our clients who trade with China,” said Mauricio Schwartzmann, Head of Treasury and Trade Solutions at Citi Peru.
The Chinese government launched an effort to internationalize its currency in July 2010, opening an offshore currency market (CNH) in Hong Kong. Taiwan, Singapore and London help facilitate commercial agreements in RMB according to time zone.
Citi has made payments in RMB for its clients in Latin America since 2011, but this is the region’s first letter of credit denominated in Chinese currency. Letters of credit are one of the payment methods most commonly used by Latin American companies in commercial transactions with China. In March 2012, Citi launched a new Latin American Trade Desk in Asia, based in Shanghai, China, to help link its Latin American clients with Asia.
Trade between China and Latin America grew 8% to total more than US$255 billion in 2012, making Latin America the second leading destination for Chinese investments. Chinese sales to Latin America grew by 11%, reaching US$131 billion, compared to a 5% increase in Latin American exports to China, which totaled US$125 billion. Peru accounted for approximately 6% of this total trade. As of July 2013, China is Peru’s second largest trading partner, with commercial ties totaling US$8.3 billion.
With the new letters of credit in RMB, Citi is able to offer its clients in Peru and 22 other markets in Latin America an additional alternative for financing their operations with commercial counterparts in China, a unique advantage that enables them to mitigate FX risks, improve their terms of trade and create relationships with Chinese companies. Citi’s innovative solutions allow clients to grow their provider and/or consumer base and improve management of the provider chain in the world’s most dynamic commercial corridor.
The first issue of an import letter of credit in RMB marks a new trend in commercial transactions with strategic partners such as China, possible only with the type of global platform that Citi can offer in more than 160 countries.
“Even though our foreign trade strategy with China remains solid and enjoys a positive future outlook, Peruvian companies should still move quickly to catch up with global trends,” stated Othman Gamero, Structured Trade Sales Head for Latin America.
Citi Treasury and Trade Solutions (TTS), provides integrated cash management and trade finance services to multinational corporations, financial institutions and public sector organizations across the globe. With a full range of digital and mobile enabled platforms, tools and analytics TTS continues to lead the way in delivering innovative and tailored solutions to its clients. It offers the industry’s most comprehensive suite of treasury and trade solutions including cash management, payments, receivables, liquidity management and investment services, working capital solutions, commercial and prepaid card programs, trade finance and services. As of the second quarter of 2013, average deposits and other customer liability balances were $424 billion.
Re-disseminated by The Asian Banker