Currency Rout in Argentina Boosts Uruguay Wealth Management

(Bloomberg) — The currency crisis roiling Argentina is breathing life back into Uruguay’s wealth management industry suffering from an exodus of clients and firms in recent years, according to Gletir Corredor de Bolsa.

Argentines have moved $30 million to Gletir in the past four months, said Juan Jose Varela, who oversees $700 million as the head of wealth management at the Montevideo-based firm. That’s compared with the $40 million they had pulled out since December 2015 when President Mauricio Macri took office. Argentines account for about half of Gletir’s nearly 2,000 clients.

“Many clients who were thinking about going to local institutions in Argentina have stayed with us,” he said. “Many of those that did leave Uruguay have returned. It’s a trend in the private banking industry.”

For generations, Uruguay served as an offshore haven for Argentines seeking to protect their saving from high taxes and periodic financial crisis back home. Macri’s sweeping tax amnesty in 2016 and new financial transparency rules in Uruguay had spurred many to repatriate their money. Foreigners, mostly Argentines, account for about 10 percent of total deposits in Uruguay, down from about 41 percent more than 15 years ago.

Firms including Itau Unibanco Holding SA and UBS Group AG were all considering expanding or opening wealth-management businesses in Argentina.

Yet, the recent currency rout, spiraling inflation and the prospect of a second recession in three years has damped that optimism about asset management in Argentina.

“Uruguay wasn’t just losing clients, it was also losing bankers that returned to Argentina,” said Varela, who was the country manager for Argentina’s Puente before joining Gletir in July 2017. Today, they “are reconsidering that move.”

Paraguay Expansion

Gletir plans to boost assets under management to $1 billion in Uruguay. It’s also expanding in Paraguay where its local brokerage house GLT Casa de Bolsa started operating this month after receiving final regulatory approval.

GLT is already structuring two corporate bonds in Paraguay for as much as $60 million. The company also plans to hire as many as 15 bankers from small family offices and financial advisory firms in the next three years to build its wealth management business from scratch to $1 billion by 2023, Varela said.

“We believe that Paraguay is the place to be in the coming years,” Varela said. “It’s a country that is less developed in wealth management and capital markets and where we see a lot of upside.”

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