LT CFO Event – March 20, 2009

On March 20, Latin Trade brought together more than 25 top financial officers from multinational corporations for the first LT CFO Forum of 2009. The program, sponsored by Ernst & Young, began with a look forward at what commercial, financial and regulatory challenges companies in the region – especially multinationals – will face this year. 

Panelist Manuel Solano, the regional director of international tax services for Ernst & Young in Latin America, began by explaining that because of the global economic downturn, most governments in the region had stepped up efforts to collect tax revenue, targeting “cash-rich” multinational companies. One exception was Mexico, which had taken a more pragmatic view toward multinationals, Solano said.

Venezuela was front and center for most of the top financial executives. Panelist Salvador Torralbas, the Latin America CFO for Teva Pharmaceuticals, described the operating environment in that country as “challenging,” in part because of the difficulties involved with repatriating profits without taking an excessive hit on taxes. Torralbas said that bringing money into Venezuela to pay for locally sourced raw materials and components was also tricky for companies like Teva.

One of the key issues discussed was whether government fiscal stimulus plans being launched in the region would be sufficient to boost moribund economies. Alex Cordero, senior director of finance for Latin America and the Caribbean for Burger King, said that the Mexican government had been slow to react, while Brazil’s large foreign reserves created a better position.

In a panel on strategies for hedging risks and repatriating profits, Terri Grosselin, director of tax accounting and risk advisory services in Latin America for Ernst & Young, said many multinationals are trying to bring cash back to headquarters to pay off debt. She added that Brazil has simplified the process of repatriating dollars, creating predictability, while Argentina and Venezuela had larger bureaucracies.

Nino Treusch, vice president of finance and planning for SonyEricsson, told the group that companies with fixed costs and large volumes were being hard hit by the crisis. Treusch said he would not be surprised to see the “gray market” – goods sold through unofficial distribution chains – expand in coming months. Ed Andujar, FedEx’s CFO for the Latin America and Caribbean region, spoke about getting the most out of tax exemptions and advanced pricing agreements.

In the panel on cash management and liquidity, Marvin Diaz, finance managing director for Latin America at American Airlines, discussed the challenge of building a mostly electronic platform to interface with dozens of banks to allow the airline to pay its numerous vendors efficiently. Diaz said establishing company-wide financial transparency was vital to create accurate cash management and forecasting.