Latin America reacts cautiously to the bankruptcy of banks in the US.

The reactions of the Latin American banking sector to he US collapse of Silicon Valley Bank (SVB) and Signature Bank They fluctuated this Monday between the tranquility of Brazil, the weakness of the Mexican peso and the stock market losses in Argentina, while experts analyze what repercussion this crisis may have in the region.

WHAT HAPPENED?

The SVB, based in California and considered the 16th largest bank by capitalization in the country, announced last Wednesday that it was seeking a capital increase to face its financial difficulties.

That announcement led many customers to withdraw their deposits, which is popularly known as "bank run"so that regulators had to close the entity on Friday as a result of the lack of liquidity, which in turn affected the financial sector in the US and other countries.

In fact, on Sunday the US regulatory bodies closed the New York Signature Bank, which provided services, above all, to law and cryptocurrency companies.

Although the Treasury Department, the Federal Reserve (Fed) and the Federal Deposit Insurance Corporation announced that customers would have access to all money deposited with the SVB and that taxpayers "they will not bear the losses" of the bank, fear spread like wildfire among Americans and put their Latin American neighbors on alert.

NO RISKS, FOR NOW, FOR BRAZIL

In Brazil, the government considered that the bankruptcy of the SVB is "serious"but so far he sees no risk of it translating into a global crisis of the system.

 "Apparently it is not going to generate a systemic crisis, I did not see anyone treat this episode like Lehman Brothers"which collapsed in 2008 and generated an international financial crisis, "but what happened is serious"admitted the Minister of Finance, Fernando Haddad.

And while Haddad considered "positive" the Fed’s reaction to "guarantee deposits" and avoid a general flight of capital, he pointed out that the information disclosed for now "are not enough to measure the size of the problem".

He also specified that "it’s not clear yet" if the monetary authority of Brazil is going to take any action "by virtue of the effects on peripheral economies".

THE MEXICAN PESO WEAKENS

For their part, in Mexico experts consulted by EFE assured that the bankruptcy of the two entities will not generate a "contagion effect" the local banking system, although it has affected the "super weight" Mexican.

"No contagion effect expected", estimated the director of Economic and Financial Analysis of Banco Base, Gabriela Siller, because the regulation of the sector is stricter in the country. Nonetheless, "there will be entities that, before the collapse of a bank, do not receive the expected payments in a timely manner. This would imply a domino effect"he explained.

In addition, the Mexican peso depreciated 2.52% this Monday and fell to 18.97 pesos per dollar, according to the Bank of Mexico.

"The depreciation of the peso is due to an increase in risk aversion in global financial markets as a result of the fall of SVB Financial Group in the United States, which has generated speculation about a possible crisis in the financial system"Siller noted.

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And this because, according to Janneth Quiroz, deputy director of Economic Analysis at the Monex financial group, "The Mexican peso is the currency that is most exposed to an economic crisis caused by the financial sector in the US.".

ARGENTINA ASSESSES THE DANGERS

The bankruptcy of the SVB was felt strongly at the opening of the Argentine market, mainly sovereign bonds, with a drop in their prices that caused the country risk to shoot up 6.5%, up to 2,350 basis points, due to greater aversion to the danger due to global context.

But "For the impact to be felt in Argentina, it will have to be a financial crisis that, at least for the moment, cannot be seen. The situation is under control, which does not mean that it cannot change quickly"assured EFE the head of equity sales & trading of Adcap Grupo Financiero, Santiago Ruiz Guiñazú.

COLOMBIA FEELS THE TAIL

The Colombian reaction led to the shares of some of the main financial entities having the biggest falls during the day on the Colombian Stock Exchange (BVC), whose capitalization index (Colcap) fell 2.8%, to 1,154, 07 units.

The titles with the greatest decreases were those of the Bancolombia banks (-6.55% in the normal ones and -5.94 in the preferential ones) and Davivienda (-4.37% in the preferential ones). Andrés Moreno Jaramillo, professor of Economics at the Universidad del Rosario, told EFE that "stocks have fallen because there is a very high risk premium in the market".

And although today the dollar had a volatility "a little up"did not represent "liquidation of massive portfolios"added the expert. "It would have been worse if the US did not come out to calm down with the liquidity issue"he added.

SOLIDITY AND SAFETY IN PUERTO RICO

For its part, the Office of the Commissioner of Financial Institutions (OCIF) in Puerto Rico assured that the banking sector on the island "is solid and safe" after the collapse of SVB and Signature Bank.

"Banks in Puerto Rico are sufficiently well capitalized and strategically diversified, so their customers’ deposits are completely safe and do not face any risk."assured the OCIF commissioner, Natalia Zequeira Díaz.

Fortunately, "the problems that plague Silicon Valley Bank and Signature Bank are particular to them, not to the banking system in general"the official said.

THE CRISIS GOES UNNOTICED IN CHILE

In Chile, however, the US banking situation is going unnoticed by the Ministries of Economy and Finance, the Central Bank and the financial entities established in the country.

As far as currencies are concerned, the dollar reached a maximum of 813.50 pesos and then moderated its rise.

The Chilean peso was not infected by the weakness of the dollar in the world because the prices of copper, of which the country is the largest global producer, reversed their fall.

 

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