From uncertainty to control: transforming liquidity management in LATAM

First installment in a series on liquidity management in Latin America

Introduction

In a constantly evolving global environment, liquidity management has become a top priority for treasury and finance departments. In Latin America (LATAM), this task presents unique challenges due to regulatory diversity, market volatility, and the lack of regional harmonization. Therefore, in this series of articles, we will address—practically and strategically—the three major challenges companies face when optimizing liquidity in the region, as well as the most effective solutions to overcome them.

Macroeconomic context: a demanding scenario for liquidity management

LATAM’s economic landscape is marked by an uneven recovery and persistent risk factors. Although inflation has declined from the peaks of 2022, it remains high in several countries, and core inflation is moderating only slowly. Central banks, which led the cycle of rate hikes, are now cautiously moving towards gradual cuts. Real interest rates remain positive, and the rate differential compared to economies like the United States continues to influence capital flows and currency volatility.

Moreover, the region lacks a harmonized regulatory environment as seen in Europe, perpetuating regulatory and fiscal fragmentation. Each country has its own rules regarding payments, capital controls, taxation, and reporting, complicating centralized treasury management and increasing operational and compliance costs.

What’s coming in the series

Throughout this series, we will explore in detail the major challenges that make a difference in liquidity management in LATAM:

1. Structural and regulatory complexity

2. Currency volatility and compliance pressure

3. Operational inefficiency and information silos

In this first installment, we will delve into structural and regulatory complexity, analyzing its direct impact on liquidity management and proposing concrete strategies to overcome it.

Liquidity optimization in LATAM: the challenge of structural and regulatory complexity

A regulatory mosaic: diverse regulations

Unlike other regions with harmonized frameworks, in LATAM each country imposes its own banking, tax, and foreign exchange rules. This means that moving funds between countries, consolidating balances, or implementing advanced liquidity structures such as cash pooling, virtual accounts, or POBO/ROBO schemes can be extremely complex or even unfeasible in certain markets.

Banking fragmentation: the daily reality for treasury

Bank fragmentation is a daily reality for most companies in the region. It is not uncommon for a company to manage dozens of accounts across multiple banks and countries.

This fragmentation is not accidental. It is largely due to the absence of truly global banks that provide homogeneous coverage across the region. While there was a time when major international banks sought multisectoral presence in Latin America, in the past decade many have reduced their footprint or even exited several markets. The reasons for this withdrawal are varied: complex and shifting regulatory environments, lower profitability margins in certain markets, high economic volatility, and a need for global banks to focus on “core” or strategic markets. The result is that, in practice, no international banking institution manages to offer comprehensive coverage across all LATAM countries. Companies end up managing a “mix” of banks: some global banks with limited presence and a large number of local banks.

This dispersion creates very concrete operational challenges:

• Lack of centralized visibility: managing different banks, formats, and systems makes real-time cash visibility difficult, impacting financial decision-making.

• High operational costs: managing multiple banking relationships, payment formats, and reliance on manual processes increases costs and the risk of errors.

• Limitations to optimization: structures like cash pooling are hard to implement and often restricted by local regulations.

Additionally, the practice of maintaining more than three banking relationships per country and depending on physical branch presence remains common, especially for B2C companies or markets where cash and paper usage prevails. This is compounded by the issue of incomplete banking coverage for large segments of the population, reinforcing the need to maintain dispersed banking infrastructures.

How can technology help?

In this context, the advanced connectivity offered by Kyriba makes a real difference. Our platform enables the integration of multiple banks, formats, and entities into a single, centralized, real-time view. Thus, even in a fragmented and regulated environment, treasury teams can:

• Consolidate balance and transaction information from all accounts in real time, regardless of country, bank, or format, facilitating global cash visibility and control. Kyriba maintains connectivity with more than 9,000 banks worldwide, including virtually all global banks present in LATAM and an extensive network of local banks. Our platform supports the main banking connectivity protocols (SWIFT, host-to-host, APIs, SFTP, etc.).

• Leverage a library of more than 50,000 payment and bank reporting formats, including global standards (ISO 20022, MT, BAI) and bank- and country-specific configurations for LATAM, which simplifies integration and reduces implementation time.

• Benefit from advanced tools for reporting, analysis, and cash flow forecasting, facilitating strategic decision-making, local and global regulatory compliance, and the generation of actionable insights for liquidity optimization. Kyriba allows you to model scenarios, anticipate needs, and evaluate the impact of financial decisions before executing them.

• Native integration with leading ERPs and accounting systems: Kyriba offers standard connectors and APIs for SAP, Oracle, Microsoft Dynamics, and other ERPs, facilitating end-to-end process automation, comprehensive cash position visibility, and reducing financial close times.

Conclusion and preview

Structural and regulatory complexity in LATAM is a challenge, but not an insurmountable barrier. With the right technology, it is possible to centralize liquidity management, gain agility, and reduce risks.

In the next installment, we will address how currency volatility and tighter compliance controls are transforming liquidity management—and which technological tools can help protect capital in an uncertain environment.