How banking systems, capital markets, and international partnerships can support the region’s long-term investment needs

The 60th Annual Assembly of the Latin American Federation of Banks (FELABAN) in Lima brings regional banking leaders and international counterparties together to consider the opportunities shaping Latin America’s financial future. Alongside the relationships developed and transactions discussed, the gathering provides a setting for a broader examination of banking’s contribution to growth. The central question is how institutions can connect domestic savings and international capital with the investment that will strengthen the region’s productive capacity over the coming years.

Banks occupy an important position in that process, combining knowledge of local economies with the ability to evaluate borrowers, arrange financing, and connect clients with wider financial markets. Their contribution can extend further through partnerships with development institutions, pension funds, insurers, and other long-term investors, each bringing different funding horizons and capacities to bear risk. The opportunity is to bring those capabilities together in arrangements suited to the investments they support, with careful attention to currency, maturity, repayment, and the changing requirements of projects as they develop.

The timing is significant. Published on November 4, the jointly produced Latin American Economic Outlook 2026, issued by the Organisation for Economic Co-operation and Development (OECD), places deeper regional and global integration at the center of the development discussion. It identifies opportunities in energy, strategic materials, digital activity, and other productive sectors, while examining the infrastructure, financing, and institutional conditions needed to realize them. For banking, the implication is practical: the usefulness of capital depends on the terms under which it reaches an investment and the risks it is expected to bear.

A Stronger Starting Point

The financial foundation is more substantial than a familiar narrative of regional vulnerability might suggest. The International Monetary Fund’s (IMF) July 2026 assessment found Brazil’s financial system resilient, with well-capitalized and liquid banks. Its October mission statement on Mexico likewise identified strong capital and liquidity buffers, low nonperforming loans, and solid profitability. These are assessments of particular systems at particular dates, not assurances about every institution, but they establish a constructive starting point.

Peru illustrates why that strength and the pace of financial development must be examined separately. The IMF’s 2026 consultation reported a banking-system capital ratio of 17.9% at the end of 2025, alongside ample liquidity and subdued credit growth. Its analysis also identified credit demand and other economic factors behind the lending cycle. Modest expansion of bank credit cannot, on its own, establish that banks lack resources or are preventing otherwise viable investment.

The appropriate next question concerns the investments seeking finance. Some require stronger preparation, others more equity, a different maturity, or a currency arrangement consistent with their revenues. An institution may have the capacity to lend while concluding that the proposed transaction places risks on the wrong balance sheet. Improving intermediation means resolving those problems where possible, rather than treating every refusal or delay as evidence that credit standards should be relaxed.

Country differences remain essential to that judgment. The IMF’s October regional outlook describes resilient activity supported by external conditions, but also constrained policy space and subdued medium-term growth prospects. Its analysis of foreign direct investment finds that substantial inflows have not consistently translated into equivalent gains in exports and productivity. The challenge extends beyond attracting money to strengthening the conditions under which investment becomes economically productive.

The Cost and Currency of Capital

For an institutional borrower, the policy rate is only one component of financing conditions. The relevant maturity, issuer risk, currency, liquidity, and terms of the transaction also affect the cost of funds. A May 2026 volume published by the Bank for International Settlements (BIS) examines how emerging-market financing increasingly reflects the interaction of local-currency markets, international investors, domestic capital flows, and non-bank institutions. Domestic and international conditions cannot be evaluated independently.

The distinction is visible in a hypothetical infrastructure investment with local-currency revenues and dollar debt. A lower dollar coupon may initially look attractive, but depreciation of the revenue currency would increase the local amount needed to service the obligation. An exporter with dependable dollar receipts would face a different calculation. The location of an investment does not, by itself, reveal its currency risk; the relationship between receipts and payments does.

Hedging can alter that exposure, but it has a cost and may introduce collateral or refinancing requirements of its own. The useful comparison is between complete financing arrangements, including the period for which protection is available. A project requiring capital for fifteen years cannot assume that a short-term hedge, renewed repeatedly, will preserve the original economics throughout its life.

Local-currency funding can reduce a particular mismatch without removing credit or liquidity risk. International funding can broaden available capital without making every cross-border structure preferable. The institutional task is to identify which arrangement remains workable under less favorable exchange rates, borrowing costs, and operating conditions. Access becomes valuable when it expands suitable choices, rather than merely increasing the number of currencies in which debt can be issued.

Financing an Asset Over Its Life

Banks routinely transform funding into assets with different maturities. The prudential question is whether the funding structure is sufficiently stable for the exposures being undertaken. The Basel Committee on Banking Supervision (BCBS) addresses this through its net stable funding ratio, which relates available stable funding to the characteristics of assets and other commitments. Its purpose includes limiting excessive reliance on short-term wholesale funding, not requiring every long-term loan to be matched by an identical deposit.

That distinction matters when discussing infrastructure and productive investment. Consider a proposed port expansion. During construction, lenders must evaluate completion costs, contractor performance, and the possibility of delayed operations. Once the facility is functioning, the assessment can place more weight on actual traffic, operating expenses, and contractual receipts. The asset’s financial characteristics change as it moves from development into operation.

Its financing can reflect that progression. Sponsor equity may absorb early uncertainty, bank facilities may support construction, and a later bond or institutional loan may become suitable once performance is established. This is a possible structure, not an assured refinancing sequence. A prudent transaction needs to address what happens if the anticipated capital-market exit is unavailable when construction ends.

The broader opportunity is to finance each stage with capital suited to its risks. Requiring one institution to retain every exposure indefinitely may constrain an otherwise credible project. Transferring those exposures without adequate information can create a different problem. Sound intermediation combines the ability to originate and monitor an investment with a realistic plan for how its financing will evolve.

More Than One Balance Sheet

There is evidence that financing channels are already becoming more diverse. In its 2026 financial-system assessment, the IMF put corporate bond financing in Brazil at 18.5% of gross domestic product, compared with 7% in 2018. That development does not describe every Latin American market, but it demonstrates how capital markets can expand alongside a substantial banking system rather than simply replace it.

For banks, deeper markets can create opportunities in origination, underwriting, distribution, custody, and treasury management. For institutional investors, they can provide access to exposures with payment schedules appropriate to their liabilities. The match is not automatic. A pension institution seeking long-term income still needs acceptable credit quality, valuation, and liquidity; an insurer cannot treat the duration of a project as sufficient evidence that it belongs in its portfolio.

The institutional connection is visible in development finance. IDB Invest, the private-sector arm of the Inter-American Development Bank (IDB) Group, reported $13.1 billion in total activity for 2025, including $7.7 billion in mobilization. Its annual report describes a model that combines originating investments with bringing other capital providers into them through several channels. Those figures concern the institution’s reported activity, not all financing in the region, but they illustrate the scale at which coordination is already occurring.

The economic logic is to distribute responsibilities among parties equipped to perform them. A local institution may understand the borrower and operating environment; another lender may provide a suitable funding horizon; a development institution may contribute project preparation or a defined guarantee. The new OECD outlook identifies such cooperation among development institutions, commercial banks, investors, and markets as an important route for financing cross-border infrastructure and trade.

Guarantees and risk-sharing arrangements still need to be read as contracts. Their coverage, conditions, exclusions, and claims procedures determine their practical value. They can address particular obstacles to financing, but cannot turn an economically unsound project into a productive asset merely by changing which institution carries the exposure. Repayment capacity must remain central to the transaction.

International Relationships That Support Investment

The case for stronger regional connections is tangible. According to the Latin American Economic Outlook 2026, trade within Latin America and the Caribbean represented only 14% of the region’s total exports in 2024. The report argues that deeper regional markets and value chains can help firms achieve scale and strengthen their participation in global activity. Its regional grouping includes the Caribbean, and the aggregate should not be mistaken for the trade profile of every individual country.

Financial relationships are one part of making those connections usable. A cross-border investment can require a local operating account, international settlement, foreign-exchange execution, custody, and financing from counterparties governed by different rules. The analytical question is whether those arrangements work together. A strong investment thesis has limited practical value if the transaction cannot be funded, documented, or settled on the assumed terms.

Correspondent banking deserves a specific place within that assessment. The Financial Action Task Force (FATF) distinguishes identifying and managing the risks of a relationship from indiscriminately avoiding entire categories of institutions. Its guidance supports a risk-based approach grounded in understanding the respondent bank and the business being conducted. That framework favors informed assessment rather than reliance on a regional label.

For institutions seeking durable international relationships, the implications are concrete. Ownership information, financial reporting, transaction explanations, and control frameworks need to be understandable to the counterparty evaluating them. Commercial expectations also need to be realistic: a relationship must fit the capabilities and responsibilities of both institutions. Familiarity can improve judgment, but it should be reinforced by evidence and dependable execution.

Regional cooperation does not require every market to adopt an identical financial model. Compatible information, clearer contractual arrangements, and workable procedures can reduce friction while preserving local accountability. The objective is to make a transaction easier to assess and complete across jurisdictions, without making its risks harder to locate.

The Infrastructure Beneath Institutional Finance

The digital discussion takes on a different character at this level. Its relevance lies in settlement, reconciliation, collateral administration, reporting, and the ability to identify exposures across accounts and entities. A faster customer interface cannot establish whether an institution has usable liquidity in the required currency or whether securities can be delivered before a settlement deadline. Those are questions about the systems and authority supporting the transaction.

Consider an institutional investor holding assets with several custodians while maintaining financing arrangements with different banks. Consolidated information can help identify concentrations, available collateral, and upcoming payments. Yet a consolidated view does not itself make assets transferable between legal entities or release holdings already pledged elsewhere. Technology becomes financially useful when it supports accurate decisions about rights and resources, rather than merely displaying them more attractively.

Reliability matters as much as speed. The Basel Committee’s operational-resilience principles focus on maintaining critical operations through disruption, including failures involving external providers. They require attention to dependencies, contingency planning, and the ability to respond when an important service becomes unavailable. These principles provide a useful standard for institutional modernization: efficiency should be accompanied by a credible account of how essential activity continues under stress.

This creates room for collaboration without surrendering responsibility. Shared infrastructure and specialist providers can extend what an institution is capable of delivering, but a common provider can also create a common point of failure. The BIS’s 2026 summary of third-party risk-management principles emphasizes that outsourcing can reduce direct control and introduce additional dependencies. A stronger financial network therefore needs both effective connections and tested alternatives.

Growth That Preserves Financial Strength

Expanding the range of capital providers can support investment, but it also changes how stress moves through the system. Brazil’s 2026 IMF assessment identifies substantial connections between banks and investment funds, including the possibility that pressure in funds could feed back into bond prices. The lesson is relevant beyond that market: transferring an exposure changes who holds it, but does not necessarily remove the financial system’s underlying sensitivity to it.

An institutional assessment should consequently examine the combined effect of adverse developments. A refinancing may become difficult at the same time that the borrower’s currency weakens or the market value of collateral falls. Several apparently separate investments may depend on the same revenue source, sponsor, or export market. Testing those relationships is more informative than assuming that diversity of legal entities guarantees diversity of economic risk.

There is also a limit to what financing alone can accomplish. The IMF’s regional analysis links the weaker-than-expected productivity benefits of foreign investment to factors including logistics, innovation, and the capacity to absorb technology. Banking can help finance improvements, but it cannot substitute for their execution. The quality of a financing proposal includes a credible assessment of the operational and institutional conditions on which its success depends.

A More Productive Financial System

The next stage of Latin American banking need not be defined by a single technology, product, or source of capital. Its more substantial contribution would be to improve the relationship between the region’s investment requirements and the institutions capable of financing them. That involves a wider range of maturities, better coordination across currencies, credible distribution of risk, and deeper connections between banking and capital markets.

For institutional partners, the opportunity lies in combining capabilities that do not have to reside on one balance sheet. Local knowledge, international access, investment expertise, and operational reliability can reinforce one another when responsibilities are clearly assigned. The resulting value is measured through financing that remains workable as a project develops and through relationships that continue to function when conditions become less accommodating.

FELABAN provides a setting in which those relationships can begin or deepen. Their lasting significance will emerge afterward, in transactions whose terms match the economic activity they support. Latin America’s next stage of growth will be better served by a financial system able to make those distinctions: between available liquidity and durable funding, between strategic importance and repayment capacity, and between the volume of capital supplied and the quality of the investment it makes possible.

About Berkeley Financial

Berkeley Financial is an international financial group providing institutional banking, private banking, investment services, custody, securities financing, and cross-border financial solutions. Its approach emphasizes governance, relationship-driven execution, and the requirements of institutions and sophisticated clients with international financial needs.

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Disclaimer

This article is provided for informational purposes only and does not constitute investment, legal, tax, regulatory, or financial advice, nor an offer or recommendation concerning any financial product, service, or transaction. References to institutions, reports, and financing arrangements are explanatory and do not imply affiliation or participation by Berkeley. Examples are hypothetical, and market observations reflect the dates of the cited sources. Investment and financing decisions should consider the relevant documentation, jurisdiction, repayment capacity, liquidity requirements, currency exposure, and ability to bear loss.

References

1. Latin American Federation of Banks (FELABAN). 60th Annual Assembly of FELABAN 2026. Official conference website. Lima, Peru, November 3–6, 2026.
2. Organisation for Economic Co-operation and Development (OECD), Economic Commission for Latin America and the Caribbean (ECLAC), CAF, and European Commission. Latin American Economic Outlook 2026: Deepening Integration into a Changing Global Economy. OECD Publishing, Paris, November 4, 2026. Particularly the Executive Summary and Chapter 3, “Enabling Conditions to Unlock Stronger Regional Integration and Enhance Participation in the Global Economy.”
3. International Monetary Fund (IMF). “IMF Executive Board Concludes 2026 Article IV Consultation with Brazil.” July 23, 2026.
4. IMF. “Mexico: Staff Concluding Statement of the 2026 Article IV Mission.” October 2, 2026. Staff assessment of macroeconomic conditions, financial-system resilience, and priorities for financial intermediation.
5. IMF. Peru: 2026 Article IV Consultation—Press Release; Staff Report; and Statement by the Executive Director for Peru. IMF Country Report No. 26/113, May 29, 2026.
6. IMF. Regional Economic Outlook: Western Hemisphere, October 2026. Turning Tailwinds into Lasting Gains. October 2026. Particularly Chapter 2, “The Missing Link: From Foreign Direct Investment to Trade and Productivity Gains.”
7. Bank for International Settlements (BIS). Capital Flows, Exchange Rates and Financial Conditions in EMEs in an Evolving International Monetary System. BIS Papers, No. 171, May 26, 2026.
8. Basel Committee on Banking Supervision (BCBS). “Net Stable Funding Ratio.” Basel Framework, published by the BIS. Standards addressing stable funding, asset characteristics, and reliance on short-term wholesale funding.
9. IMF, Monetary and Capital Markets Department. Brazil: Financial System Stability Assessment. IMF Country Report No. 26/192, July 23, 2026. Assessment of banking resilience, capital-market development, investment funds, and financial-system interconnections.
10. IDB Invest. IDB Invest Annual Report 2025. Published March 26, 2026. Review of financing activity, private-capital mobilization, and implementation of the institution’s originate-to-share model.
11. Financial Action Task Force (FATF). Guidance on Correspondent Banking Services. October 2016. Guidance on applying a risk-based approach to correspondent relationships and distinguishing risk management from indiscriminate de-risking.
12. BCBS. “Operational Resilience.” Basel Consolidated Guidelines, ORR20, published by the BIS. Incorporates the March 2021 Principles for Operational Resilience, covering continuity, critical operations, dependencies, and disruption management.
13. Financial Stability Institute (FSI). “Sound Management of Third-Party Risk: Executive Summary.” BIS, March 25, 2026. Overview of third-party service arrangements, operational dependencies, concentration risk, and institutional accountability.

Sources accessed November 5, 2026. Economic data, forecasts, and institutional assessments reflect the dates and geographic coverage of the original publications. References to external organizations and financing arrangements are explanatory and do not imply affiliation, endorsement, or Berkeley’s participation.