Category Finance News

With its exit from Central America and Colombia, Scotiabank follows the trend of international banks retreating amid rising compliance costs and risks. 

Scotiabank has officially exited retail banking in Panama, Costa Rica, and Colombia, marking the latest move by a major international lender to scale back in the region. The deal, which gives Scotiabank a 20% stake in Banco Davivienda in exchange for its retail operations, highlights a broader trend as mounting compliance costs, de-risking pressures, and shifting profit priorities drive global banks to rethink their presence in Latin America and the Caribbean.

Scotiabank’s exit also fulfills a promise CEO Scott Thomson made in 2023 to refocus on more profitable North American markets. The decision marks the end of a more than decade-long expansion that initially defied the de-risking trend. In 2012, Scotiabank made a bold play for Colombia’s growing financial sector, acquiring a majority stake in Banco Colpatria for $1 billion. It continued its push into the region in 2016, purchasing Citibank’s retail operations in Costa Rica and Panama for $360 million.

But while Scotiabank was expanding, many global banks were already reassessing their footprint in high-risk markets.

“As large international banks that provide payment services to the region face tougher compliance measures, many have made a cost-benefit decision that the material compliance costs from doing business in the region far outweigh the benefits,” says Adrian Stokes, CEO of Quantas Capital in Jamaica. “Therefore, it makes good business sense to stop offering correspondent banking services to regional banks.”

The shift has accelerated in recent years as exiting banks cite a combination of rising compliance costs and concerns over anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations. The US Treasury, the European Union, and the intergovernmental Financial Action Task Force (FATF) have deemed certain markets high risk, making operations more costly. Heightened capital requirements, introduced after the 2008 financial crisis to prevent taxpayer-funded bailouts, have further contributed to the de-risking trend.

Latin America and the Caribbean have been hit hardest, with the former losing an average of 30% of its correspondent banks, according to a 2020 report by the Bank for International Settlements. The Bahamas, Belize, Dominica, Jamaica, and St. Vincent and the Grenadines all lost at least 40% of their correspondent banks between 2011 and 2020, with Trinidad and Tobago landing just below that threshold.

Economic Consequences

The banking pullback has limited access to international finance and credit in regions heavily reliant on remittances, worth 20% to 27% of GDP in Central America, and tourism, which accounts for up to 90% of GDP in some Caribbean nations. In 2022, tourism provided 1.8 million direct jobs and generated an estimated $62 billion for the Caribbean: close to half of the $136 billion in GDP the International Monetary Fund estimates for the region for 2024.

A dearth of correspondent banks reduces access to international finance and credit, increases the transaction cost of cross-border payments, and delays innovation, such as hotels’ attempts to go cashless. For clients, the effects can range from reduced access to trade finance, issues with clearing checks and foreign money transactions, and heightened dollar supply concerns in some countries.

Over the decade since HSBC was fined $1.9 billion for laundering cartel money in Mexico, other banks are still being investigated, including Wachovia and TD Bank, which were fined a record $3 billion last October by the US Treasury Department’s Financial Crimes Enforcement Network.

“The same issues in Central and Latin American markets are magnified in the Caribbean,” says Christopher Mejia, emerging markets sovereign analyst at T. Rowe Price. “Operating costs have to include natural disasters in a more difficult environment than in Central America, and [with] much smaller profits to be had. Banks now take into account reputational risks from privacy laws and rules, especially after the Panama Papers [scandal].”

De-risking has also impacted money transfer organizations (MTOs) such as MoneyGram, PayPal, UAE Exchange, and Western Union. Many have made similar decisions to de-risk from the region.

While Scotiabank will retain its commercial banking operation in Colombia, it serves primarily as a relationship management hub for large private companies looking for international banking advice.

“This is a meaningful shift in how we allocate capital,” Thomson told a media roundtable in December 2023, referring to Scotiabank’s plan to focus on more profitable North American markets. “The return profile of the international bank has not been commensurate with the risk, and it’s been a drag on overall returns.”

Filling The Gap

For customers in the Caribbean and Latin America, the shift amounts to a localization or domestication as the international banks’ operations are picked up by local banks or by large conglomerates in the region.

Bancolombia and Grupo Aval, which together own Banco de Bogotá and the BAC group in Central America, were one and two in their local market until the Scotiabank and Banco Davivienda deal. They have grown substantially in Central America, having acquired Banco Reformador (Grupo Financiero Reformador) in Guatemala for $411 million in 2013. The same year, Bancolombia acquired 40% of Banco Agromercantil, also in Guatemala, for $217 million.

Solutions to de-risking that would keep global payers in the region are not obvious, however. For global banks pinning their hopes on technology as the solution to operational cost and regulatory issues, blockchain and fintech still face the same issues as traditional banks. Neobanks have made a strong push into Mexico, especially Brazil’s Nubank, as have non-traditional financial institutions like Argentina’s Mercado Libre and Ualá. The latter are among roughly 50 firms awaiting verification by the National Banking and Securities Commission (CNBV); the process can take at least 12 months, and is notorious for delays.

The Caribbean is finding its own potential solution in central-bank stable coins, such as the Eastern Caribbean digital currency DCash. But laws are still being put in place across the region’s assortment of jurisdictions and defensive countermeasures to cyberattacks are still insufficient. Cyberattacks are still nascent in the region, so users have not faced the volume that other parts of the world have. A second concern is a brain drain from the region, an International Information System Security Certification Consortium survey in 2021 suggested Latin America needed 530,000 more cybersecurity professionals. “There is no silver bullet to the compliance challenges the region faces,” Stokes argues. “The only sustainable way to solve this issue is for the region to work in unison to improve controls around AML/CFT issues.”

Some governments in the region blame the de-risking trend on inconsistency and shifts in rulemaking by the US Treasury, FATF, and the EU. Added to these issues is the time lag between countries passing laws—that banks then comply with—and the delay in removal from watch lists for months afterward. Some Latin American and Caribbean countries say this amounts to bullying by more developed countries.

Last fall, President José Raúl Mulino of Panama and others warned that companies from countries that did not update their tax haven lists would not be considered for state contracts. Given that the $6 billion-$8 billion, high-speed Panama-David railway project is up for bid, this is not an empty threat.

Twenty-five years in the making, the landmark agreement eliminates tariffs on over 90% of goods while reshaping South America-Europe trade ties. 

A quarter-century after negotiations began, Mercosur, the South American trade bloc whose core members are Argentina, Bolivia, Brazil, Paraguay, and Uruguay, has finally signed a trade agreement with the European Union (EU). The deal runs against the grain in an era of growing protectionism and rising deglobalization.

“This agreement is not just an economic opportunity, it is a political necessity,” European Commission President Ursula von der Leyen said at the Mercosur Summit in Montevideo in December, where the pact was signed. “I know that strong winds are coming in the opposite direction, towards isolation and fragmentation, but this agreement is our near response.”

The deal is the EU’s largest ever and Mercosur’s first with a major trading partner.

“European products will enter [the Mercosur] market under much better conditions than US or Japanese products,” Federico Steinberg, visiting fellow at the Center for Strategic and International Studies in Washington, DC, wrote in a paper published on December 6. By eliminating tariffs on over 90% of goods, the agreement is expected to save EU exporters €4 billion annually while granting South American producers preferential access to European markets for competitive agricultural products.

The agreement has two parts. One covers goods, services, public procurement, and intellectual property, focusing on trade issues such as tariffs, with special attention to automobiles, agriculture, and critical minerals.

“Increasing uncertainties in geopolitics” have sparked interest in rare earth minerals, says Charlotte Emlinger, an economist at the Center for Prospective Studies and International Information (CEPII) in the French prime minister’s office. For sensitive items, such as beef exports to Europe, quotas put a lid on inflows.

The second part of the pact addresses broader themes, including human rights and the environment. Along with another 2024 EU trade pact with New Zealand, it breaks new ground by referencing the Paris Agreement on climate change, a detail notably accepted by Argentine President Javier Milei, a global-warming skeptic.

What Is Mercosur And Why Does It Matter?

With a combined GDP of nearly $3 trillion, the four core members of Mercosur—Spanish for “Southern Common Market” in Spanish—would rank as the world’s fifth-largest economy. Some 300 million people live in an area of nearly 15 million square kilometers. The GDP figure doesn’t include Bolivia, which has been approved for membership but is in a four-year “implementation period” to come fully on board.

The EU was already Mercosur’s second-largest trading partner two years ago for goods, accounting for 16.9% of total trade, trailing China but beating the US, according to the European Commission. The EU exported €55.7 billion worth of goods to Mercosur that year, with €53.7 billion going the other way.

Touted as the emerging EU of the South when it was founded in 1991, Mercosur has yet to evolve beyond an imperfect customs union. The original four added Venezuela in 2012 only to suspend it in 2016 for violating political standards; Bolivia rose to full membership last year.  Suriname, Guyana, Colombia, Ecuador, Panama, Peru, and Chile are associated states; they won’t be formally affected by the EU-Mercosur deal.

Intra-regional trade among the four founders jumped four-fold to $16.9 billion between 1990 and 1996, according to the Inter-American Development Bank, but true integration has proven elusive. Internal trade remained at just 10.3% of the global total in 2022, according to data from the Observatory of Economic Complexity, an online database.

Why Now?

The timing of the deal can be linked to efforts by the EU to ensure continued robust and diversified trade in the face of protectionist measures by the US under US President Donald Trump, the growing role of China, and the demise of the World Trade Organization (WTO) as an effective facilitator of international trade integration.

“In the last few years, the geopolitical situation has become more dire for the EU,” says Maximiliano Marzetti, associate professor of Law, Department of International Negotiation and Conflict Management, Lille Economics Management Lab in France, “with the war in Ukraine, Brexit, and the protectionist and aggressive policies of China and the United States. The EU needs new trade partners in a climate of hostility to free trade and also to assert its relevance on the current multipolar international stage.”

Mercosur-EU negotiations date much further back: to 1999, during the period of “peak globalization,” but they remained in low gear until late in the Obama administration, when the US began taking measures to weaken the World Trade Organization.

All members are far from speaking with one voice, however.

Argentina’s self-described “anarcho-capitalist” President Javier Milei has offered harsh words for Mercosur, even as he begins a one-year stint as the group’s president pro tempore. During a speech at the Mercosur summit, Milei described the bloc as “a prison that prevents member countries from leveraging their comparative advantages and export potential.”

A month later, in Davos during the annual meeting of the World Economic Forum, Milei told Bloomberg that he would abandon Mercosur and its Common External Tariff, which preempts side deals, for an accord with the US. “If the extreme condition were that, yes,” he said. “However, there are mechanisms that can be used, even being within Mercosur.”

Uruguay, too, has been exploring an independent deal with China. But “negotiations never started because of Lula’s vision of Mercosur being together,” notes Bartesaghi.

Nor do these piecemeal agreements solve all the problems. The renewed bilateral deal with the EU will not solve associate member Mexico’s problems if it is hit with higher tariffs from its northern neighbor.

“Remember that the US accounts for 80% of Mexican exports and the EU accounts for less than 5%,” says Ashkan Khayami, senior analyst, Latin America Country Risk at BMI, a British multinational research firm. “It’s not really plausible for the EU to replace the US as kind of the main destination, or even a very significant destination, for Mexican exports.”

What’s Next?

Next comes ratification. For Mercosur, this is straightforward. Legislatures must vote, but if one balks, the accord will still apply for those that approve the deal. In Europe, however, the process is complex both bureaucratically and politically.

Prior to December, French farmers were out protesting the Mercosur deal; a resolution against the deal has been filed in the French parliament. Politicians in Poland, Italy, and the Netherlands, too, are raising questions. But observers tend to chalk this up to domestic posturing.

Thanks to the above-mentioned quotas for beef, for example, “that’s just a hamburger per inhabitant,” says Bartesaghi. Paraphrasing a French colloquial saying, “Mercosur is the tree that hides the forest,” Emlinger quips.

While the EU has sovereignty over trade, other treaty issues need member states’ approval. Proponents may therefore try to split the Mercosur text into its two component parts, trade and other. The trade section could presumably be fast-tracked though the European Parliament, where it would need votes representing 65% of constituents. Other sections, including environmental issues, would take the longer, country-by-country route.

“It is likely that the EU will opt, if it can, to split the ratification process,” says Marzetti.

Kuwait’s economy is undergoing critical transformation as the authorities implement long-awaited reforms to develop the non-oil sector and diversify income. 

The Kuwaiti economy is at a turning point. In early February, the Cabinet approved a draft budget for fiscal year 2025-2026, signaling an 11% year-over-year increase in the deficit on slightly lower revenues. The proposal, still awaiting the approval of Emir Mishal Al-Ahmad Al-Jaber Al-Sabah, comes as the Persian Gulf state grapples with the need to diversify the economy in the face of persistent dependence on oil production.

Kuwait’s economy contracted by 1% in 2024 following a 3.6% decline during a 2023 recession. With hydrocarbons accounting for 90% of exports and government revenue, economic performance remains closely tied to OPEC+ production policy, global demand, and competitor output. While the World Bank projects GDP growth will surpass 2% this year, recent calls from US President Donald Trump to cut global oil prices are pressing Kuwait to accelerate its diversification efforts.

For years, political gridlock has stalled reforms. Since 2020, the Cabinet has resigned 10 times and Kuwait has held four legislative elections. But a shift is underway. Last May, the emir dissolved Parliament and partially suspended the constitution for up to four years, a dramatic move aimed at fast-tracking key structural reforms in coordination with international institutions.

“We were very skeptical in the beginning, because they made promises before, but we can see the actions and seriousness about certain reforms,” says Ahmad Al-Duwaisan, acting CEO and general manager of Corporate Banking at Al Ahli Bank of Kuwait (ABK).

Game-changing transformations such as cutting public-sector wages and subsidies, which account for 80% of total spending; introducing a value-added tax (VAT); updating the emirate’s mortgage law (see sidebar, page 78); and passing a new debt law aimed at allowing Kuwait to borrow on international markets, are still under discussion. But some legislation has been approved, signaling momentum toward reform.

In line with the Organization for Economic Cooperation and Development’s Pillar Two requirements on minimum tax rules, Kuwait is introducing a 15% corporate tax for foreign firms with revenues exceeding $750 million in at least two of the last four years. Finance Minister Noora Al-Fassam estimates the tax will target over 300 companies, raising up to $825 million annually.

“This is part of a government strategy to build a more diversified economy, attract foreign investment, and create jobs for citizens,” Al-Fassam told the local media. It also shows Kuwait is “serious in going ahead with the fiscal and economic reforms.”

While some multinationals may look to increase local partnerships or relocate regional headquarters away from Kuwait to mitigate compliance costs, the overall objective of the new measures is to position Kuwait as a competitive business hub, compliant with best global and regional practices.

“The alignment of Kuwait with global tax standards could improve credibility at a global stage and prevents the country from being seen as a tax haven for foreign investors, which could drive more sustainable and high quality FDI [foreign direct investment] inflows,” says Ali Khalil, CEO of Markaz, a Kuwaiti asset management and investment bank. “In addition, this reform sets the base for the implementation of further tax reforms, which could diversify revenue sources for the government. The additional revenue would likely be ploughed back into the non-oil economy to aid in further improving business infrastructure.”

In parallel, the government aims to improve investment frameworks and litigation procedures, and ease foreign ownership rules.

“Kuwait’s economic reforms are paving the way for significant opportunities for financial institutions,” says Khaled Yousef Al-Shamlan, CEO of Kuwait Finance House (KFH), the emirate’s second largest bank, behind the National Bank of Kuwait. “Initiatives aimed at enhancing the business environment, such as public-private partnerships and regulatory simplifications, will facilitate greater investment inflows.”

Infrastructure Revamp

Improving infrastructure is also a priority. Kuwait’s road system, once ranked the worst in the Gulf Cooperation Council (GCC), will be revamped thanks to $1.3 billion in maintenance contracts signed last October with 18 companies.

Project activity has surged in sectors including housing, health, water, waste management, electricity, and oil and gas (see sidebar, page 80). Last year, $8.7 billion worth of projects were awarded, marking a 44% year-over-year increase and the highest value since 2017, according to reports from National Bank of Kuwait (NBK), the emirate’s largest bank. Along with the 2025-2026 budget, the Cabinet has approved close to $5.6 billion for 124 projects.

KAMCO Invest, one of Kuwait’s leading non-banking financial institutions, expects “thriving economic activity, government’s resolve to execute projects before the deadlines, a supportive and strong banking sector, an expected fall in interest rates, stability in the regional geopolitical scenario, elevated oil prices, and supportive government policies for private sector participation” will continue to drive markets this year.

Overall, Kuwait has $121 billion worth of planned projects in the pipeline, with several to be awarded this year. 

Adds KFH’s Al-Shamlan, “I see growth potential in sectors that are critical to the global economy’s infrastructure and energy needs: specifically, oil and gas, construction, and services.”

Changing Landscape For Banks

The financial sector stands at the cornerstone of Kuwait’s non-oil economy. Despite fluctuating global energy prices and a tense regional geopolitical landscape, Kuwaiti lenders are showing resilience.

Standard & Poor’s (S&P) assigned a stable outlook to Kuwaiti banks in January, noting that they “operate with strong capital buffers and typically retain 50% or more of their bottom line, which supports their capitalization. The quality of capital remains strong, with a modest share of hybrid instruments.”

The financial landscape nevertheless is undergoing significant change.

In July, the government introduced legislation to bolster transparency and reduce fraud by adding more stringent screening measures for opening bank accounts. At the same time, the banking sector is beginning to mirror regional trends as consolidation efforts gain momentum.

In December, Burgan Bank announced plans to acquire Bahrain’s United Gulf Bank in a $190 million deal, set to close in the coming months. The deal “aligns with the bank’s new asset reallocation strategy and efforts to build new and diversified revenue streams,” said Burgan Group CEO Tony Daher in an announcement. With subsidiaries in Algeria, Tunisia, and Turkey as well as a corporate office in the United Arab Emirates, Burgan may also leverage the merger to expand further across the MENA region.

Other deals are in the works. In January, Warba Bank announced it would buy a 32.75% share in Gulf Bank from Alghanim Trading, one of Kuwait’s largest family businesses. Last summer, Boubyan Bank floated the idea that it might acquire Gulf Bank which would have created Kuwait’s third-largest bank, with assets exceeding $50 billion. The transaction was later called off.

Since 2018, the number of banks in the GCC has dropped from 77 to 60, primarily through mergers and acquisitions that have created regional giants. Kuwait, however, largely stayed on the sidelines until KFH completed the acquisition of Bahrain’s Ahli United Bank (AUB) in 2022, marking the MENA region’s first major cross-border consolidation and creating the world’s second largest Islamic bank, with $120 billion in combined assets.

But with 21 regulated banks serving a population of over 4 million, Kuwait, like many GCC countries, is still considered overbanked. Moreover, the sector is largely dominated by NBK and KFH, which collectively hold some two thirds of total banking-sector assets, resulting in severe competition between the other players.

“We’re all fighting over good clients, and that creates compression in margins and returns,” says ABK’s Al-Duwaisan.

The anticipated mergers are unlikely to cause significant disruption, however. Typically in GCC bank consolidations, the major shareholders—powerful families or state-owned entities—remain unchanged, with only asset restructuring taking place.

In the case of Burgan and United Gulf Bank, both entities are subsidiaries of Kuwait Projects Company (KIPCO), one of the MENA region’s largest holding companies, backed by the royal family. Boubyan Bank is a subsidiary of NBK, and had it acquired Gulf Bank or any other retail bank, it would have ended up reinforcing NBK’s already dominating position on the market.

Kuwait’s recent initiatives to promote the financial sector also focus on building up its capital markets to drive private-sector growth. The expansion of the Kuwait Stock Exchange (KSE) and reforms to streamline foreign ownership rules are starting to show results.

Last year, 69 million shares were trades on the KSE, making it one of the GCC’s most active and best performing stock markets. While investors remain mainly locals, foreign participation in trading activity represented 7.8% of total trades in 2024, up from 5.8% in 2021.

“Reforms undertaken to deepen the capital markets and improve liquidity have helped increase the visibility of Kuwait markets among foreign investors and allowed asset managers to launch new products such as ETFs and REITs, which was previously not possible,” says Markaz’s Khalil, who recently launched the GCC Momentum Fund, Kuwait’s first passive investment fund. Markaz also hopes to widen its product portfolio focus on thematic funds and products based on alternative asset classes like Private equity and Private Credit.

Following the privatization of Boursa Kuwait, which operates the KSE, in 2016, the stock exchange was upgraded to “emerging market” by global index providers MSCI, FTS Russell, and S&P. It is currently in the third phase an ambitious Market Development Plan, with attracting local family businesses to list being one of the main challenges ahead.

“The IPO wave sweeping through some other GCC countries is yet to take off in Kuwait markets,” notes Khalil. “Similarly, deal activity in Kuwait is subdued. Measures to incentivize the listing of family businesses, privatization of state assets, introduction of parallel markets, and products like ETFs would aid in market development.”

The Road Ahead

For the first time in a long while, change has come to Kuwait. By modernizing its fiscal framework and ramping up project activity, the authorities are demonstrating commitment to enact some of the long-awaited changes observers have said the country needs to step away from oil dependency.

Enthusiasm over ongoing reforms, in turn, supports increasingly positive investor sentiment. But much remains to be done to encourage and support private-sector growth that eases the state’s dependence on hydrocarbon revenues, especially as the government plans to increase oil production substantially.

One of the most anticipated reforms of 2025 is a new mortgage law, now under discussion between government ministries, banks, and the Central Bank of Kuwait (CBK). If approved, the legislation, which has been under discussion for years, would allow commercial lenders to issue housing loans; currently, only the state-owned Kuwait Credit Bank may do so.

“That’s a game changer for banks in Kuwait,” says Ahmed Al-Duwaisan, acting CEO and managing director of Corporate Banking at Al Ahli Bank of Kuwait. “Once the mortgage law comes out, it would help the retail business significantly. That’s a new avenue for conventional banks like us.”

According to local media reports, the new law would allow commercial banks to lend up to $750,000 over a term of up to 25 or 30 years; the current cap is 15 years. The required debt-to-income ratio is also expected to increase, giving borrowers more flexibility.

With over 100,000 pending home-loan applications, demand is immense, but also a significant growth opportunity for Kuwait’s banking industry.

“As government discussions on mortgages ramp up again,” says Abdullah Al-Tuwaijri, CEO of Consumer, Private & Digital Banking at Boubyan Bank, “we believe there to be an opportunity for all banks to contribute to solving the housing problem in Kuwait, which in turn will lead to additional potential growth opportunities.”

The proposed reforms are also expected to impact real estate investment.

“Reforms such as the proposed mortgage law and the recently implemented laws to prevent land monopoly will support local real estate, which is an important asset class for investors,” says Ali Khalil, CEO of Markaz, a Kuwaiti asset management and investment bank. The emirate’s real estate market has already shown impressive growth, as sales increased 36% year-over-year in 2024. And housing is expected to be a key driver in the government’s ambitious $121 billion suite of megaprojects, further fueling the sector’s expansion.

In January 2024, Khaled Al-Sabah, CEO of Kuwait Petroleum Corporation (KPC), unveiled an ambitious $30 billion investment plan aimed at boosting the emirate’s oil production capacity by 40%. The target is to increase output from 2.8 million barrels per day (bpd) to 4 million bpd by 2040.

To turn ambition into reality, state-owned KPC, which has long relied on onshore reserves, is venturing into offshore exploration with a 6,000-square-kilometer area under review. Kuwait Oil Company (KOC), a KPC subsidiary, has already made significant strides with the discovery of two new fields: the 74-square-kilometer Al-Jlaiaa field, revealed in January, and the promising Al-Nokhatha field, which could contain up to 2.1 billion barrels of oil and 5.1 trillion cubic feet of natural gas. New gas discoveries are of particular interest to Kuwaitis, who currently rely on imports to meet local consumption needs.

The oil discoveries could pave the way for new business opportunities as well. While Kuwait remains cautious about foreign involvement in its hydrocarbons industry, KOC last year signed a contract with US-based SLB for the drilling of 141 new wells.

Kuwait’s hydrocarbons strategy does not stop at increasing production; it also includes enhancing existing infrastructure. In 2024, the emirate inaugurated the $30 billion Al Zour refinery, Kuwait’s largest and the seventh largest in the world. At full capacity, Al Zour is set to elevate the country’s refining capacity to 1.42 million bpd, up from a current 800,000.

In tandem with this expansion, Kuwait is looking to streamline its tentacular network of hydrocarbon institutions. Currently, KPC oversees eight subsidiaries, including KOC. Back in 2020, the government mandated PwC’s international consulting firm, Strategy&, to advise on possible consolidation. Today, it may be ready to merge some of these entities in a bid to boost efficiency. Local media are already reporting on potential mergers between Kuwait National Petroleum Company and Kuwait Integrated Petroleum Industries Company as well as KOC and Kuwait Gulf Oil Company.

Latin America has them; the world wants them. But regional governments, and their citizens, are of two minds about the costs and benefits of further development. 

The increasing competition between world powers to secure the future of their manufacturing and technology supply chains is turning Latin America’s unique pool of critical minerals and rare-earth elements into a critical new battleground.

“The region has immense mineral wealth,” says Henry Ziemer, associate fellow at the Center for Strategic and International Studies (CSIS), “particularly in the form of copper and lithium, which are projected to skyrocket in demand, as well as more bespoke minerals such as niobium, used in aerospace and steel manufacturing; nickel; and rare-earth elements.”

Global demand for lithium could increase by a factor of 40 over the next 15 years, the International Energy Agency (IEA) projects, and according to S&P Global Market Intelligence, it could outpace current global production output by 2028. The IEA also projects copper demand to soar by 40% over the next five years, outpacing current output by 2030. 

Lithium demand appears more vulnerable to changing dynamics in the green energy market, particularly as the Trump administration pulls the US out of the Paris Agreement and slashes carbon emission goals. But the same can’t be said of copper, which is “almost certain to remain high in demand as it will be critical for applications ranging from green energy and electric vehicles to the wiring needed to power AI data centers,” Ziemer argues.

Latin America holds some 60% of the world’s lithium reserves and another 40% of copper reserves, as per IEA data, and is home to seven of the world’s 10 most productive copper mines. Moreover, most of the world’s top-producing countries for the two metals are in the region, with Bolivia, Argentina, and Chile spearheading the list for lithium and Chile and Peru for copper.

Diversifying Supply Chains

As competition intensifies between China and the US, particularly in technology, and as global supplies of metals become further strained by increasing demand, diversifying mineral supply chains is becoming both a geopolitical and a corporate top priority.

According to UN research, China  holds over 40% of the global smelting and refining capacity for copper, lithium, rare earths, and cobalt. In Latin America, China accounted for a massive 65% of Chilean mineral exports in 2021, amounting to about 6% of Chile’s GDP, according to the World Bank.

“China’s market dominance allows it to exert significant influence over global pricing,” says Melissa Sanderson, board member of American Rare Earths, “whether through increasing or restricting exports of key commodities or by implementing other restrictions on key materials.”

One of the main reasons US President Donald Trump has expressed a desire to annex Canada is the country’s supply of metals and minerals, Canadian Prime Minister Justin Trudeau said recently. “This is a strategic vulnerability for the US vis-à-vis China, as it is for much of the Western world, just given China’s control of the critical minerals around the world,” he observed.

In one of the first deeds of his second term, Trump declared a national energy emergency and promised to further decouple from China’s midstream supply chain. He followed this by announcing a 10% global tariff on Chinese goods, to which Beijing responded with—among other things—a curb on exports of minerals that it uses in its supply chain.

The intensifying risk of trade war is likewise prompting companies to decouple from their current mineral supply chains.

“Trump’s early signals have supply chains on edge, especially in industries that rely on manufacturing and critical materials,” says Tim Heneveld, country director for Pergolux in North America. “Companies are rethinking where they source materials, with many looking to secure alternative suppliers or shift production to regions with fewer geopolitical risks.”

Forging more resilient mineral supply chains will come at a cost, however, says Laura Dow, business director at CPG Sourcing, which specializes in sourcing materials and products with a focus on China. “Companies that prioritize a well-balanced, future-proof supply chain will be the ones best positioned for long-term success.” 

As Iggy Domagalski, CEO of Canadian industrial products and services provider Wajax, explains, “This dynamic has prompted the US and Canada to seek stronger partnerships in Latin America to diversify and secure their critical mineral supplies.”

Achieving Full Potential

While Latin America holds some of the world’s largest reserves of critical minerals and rare-earth elements, much of this is still untapped. Further development could prove a key solution for increasingly strained global supply chains. 

“The region, with a few exceptions, has so far not been able to realize its full potential in the value chains for critical minerals,” notes a co-authored research piece by Economist Impact and J.P. Morgan Private Bank, “and therefore, in those for clean energy and digital components.”

An ongoing challenge will be opening new mines, says Ziemer, “as global demand is projected to outpace production for key inputs like lithium and copper by 2030. Given that it can take years or even decades from staking a mining claim to first production, new projects need to be under development sooner rather than later or risk a worldwide supply crunch for several critical minerals.”

Local Governments: Correcting Historical Imbalances

Given these tensions, local populations distrust the sector’s push for development in the region, and particularly for the opening of new mines: a key requirement for output expansion.

“The increase in demand [for critical minerals] has come with a price, as many communities in Latin America find themselves bearing the environmental and physical costs of increased mining,” Ziemer notes.

This has pushed local governments to step in with increased state funding and more public-private partnerships, diversifying production and output supply chains.

The region’s largest economy, Brazil, which holds the world’s third-largest global reserves of nickel and rare-earth elements, has devoted $815 million to bolstering projects in the field “in the context of sustainable and technological development,” Aloizio Mercadante, president of  Brazil’s National Development Bank, said last month.

Chile’s government-operated copper mining company, Codelco, closed a 35-year agreement with lithium manufacturer Sociedad Química y Minera de Chile to codevelop the extensive lithium resources in the Salar de Atacama salt flat between 2025 and 2060, aiming to further domesticate the midstream lithium business.

In lithium-rich Argentina, the latest development has come from government, with the signing of a cooperation deal with the US to further diversify the latter’s long-term sourcing away from China.

The moves follow significant backlash against foreign mining projects in countries including Panama, Chile, and Bolivia, leading notably to the recent shutdown of the Cobre Panama mine due to environmental concerns and popular unrest.

“The incident further underscores that demand alone for critical minerals does not mean countries, or their citizens, are prepared to accept an unrestricted expansion of mining,” Ziemer cautions.

A record year for sustainable bonds, but is the global compact cracking?

For sustainable finance, 2024 was the best of times and the worst of times.

On the positive side, issuance of impact bonds, sometimes called “GSS+” bonds (green, social, sustainability, and sustainability-linked instruments) totaled $1.1 trillion, according to provisional data published by the Climate Bond Initiative (CBI) in January.

However, on the red side of the ledger, the global coalition to contain climate change seemed to be fracturing by the end of the year. The 2024 US presidential elections brought to power the new Donald Trump administration; and Trump immediately ordered US withdrawal from the Paris Agreement, the world’s main treaty to fight climate change.

Given the need to more than double spending on clean energy supply, storage, and grid infrastructure to $300 billion/year for developing countries and $1.3 trillion/year for developed countries by 2035 “to keep the 1.5 target alive” (to achieve the goal of limiting global warming to an increase of no more than 1.5°C), “2024 failed to live up to what is needed,” says Gregor Vulturius, lead scientist and senior adviser on climate and sustainable finance at SEB.

Many market observers, however, still see the glass half full—especially looking beyond North America. “The outlook for 2025 is growth in sustainable finance,” says Timothy Rahill, a credit strategist at ING (Netherlands). “We ended 2024 with an increase over 2023. Of course, in 2021 and 2022, the levels of sustainable-finance issuance were very high, and outliers in the initial rush to do green issuance.”

According to CBI’s preliminary numbers, green bonds dominated in 2024, accounting for approximately 61% of the $1.1 trillion GSS+ debt accrued that year, compared with social and sustainability bonds (34%) and sustainability-linked bonds (1%).

Rahill explains that the EU’s Green Bond Standard (GBS), which took effect in December, should eventually push green bonds further. The standard aims to boost investor confidence by setting “a clear gold standard for green bonds” in the EU.

Still, “Many other issuers, such as sovereigns, view the rigorous new requirements [of the GBS] as a significant hurdle,” according to a late-January blog post by global investment firm Franklin Templeton. “They will likely adopt a wait-and-see approach to understand all potential implications before committing to issuing a [European green bond].”

According to Moody’s Ratings, overall bond issuance soared 35% in 2024, while sustainable bonds remained flat; and the latter’s share of the overall bond market fell from 15% in 2023 and 2022 to 11% in 2024.

However, Rahill predicts that in 2025, “Issuers will return their focus to green/sustainable finance issuance.” Moody’s mostly agrees, anticipating new green bond volumes rising to about $620 billion, 2% more than in 2024, “but eclipsing the previous record of $617 billion in 2021.”

Globally, “Social bonds will be constrained by a lack of benchmark-sized projects, while transition-labeled bonds and sustainability-linked bonds (SLBs) will remain niche segments as they navigate evolving market sentiment,” the ratings agency posted on its website.

For sustainable bonds, “Market conditions will remain the same as 2024,” says SEB’s Vulturius, who predicts growth of around 10%. According to SEB’s data, 2024 saw approximately $1.2 trillion in new sustainable bonds versus roughly $1.1 trillion in 2021, the previous record year, though SEB’s numbers, like CBI’s, are still preliminary.

What about the new administration in Washington, D.C.?

“I don’t expect the sustainable finance market will see a major headwind with the Trump administration. I still think we will see growth in 2025, even in US dollar debt,” says Rahill, though some corporations may not commit until the second quarter.

The CBI identified several factors that will encourage issuance in 2025, including new taxonomic definitions and increased spending by governments, development banks, and corporations on efforts at climate change impact adaptation and resilience. The CBI also expects increased visibility from insurance companies regarding sustainable finance in 2025.

Institutions focusing on sustainable finance in its various forms will have plenty to keep them busy in 2025. With that in mind, Global Finance presents its fifth annual Sustainable Finance Awards, with winners from seven regions and 53 countries, territories, and districts; and global honorees in 14 categories.

Methodology: Behind the Rankings

Global and regional awards require submissions detailing hard metrics of ESG activity, such as year-over-year growth in sustainable finance transactions or sustainable financial instruments as a percentage of total portfolio. Softer metrics also required include goal alignment with leading ESG norms or innovative product development. Entries were not required for country awards, which were judged by the editorial team’s independent research. Evaluation criteria includes governance policies and goals, environmental and social sustainability financing achievements, industry leadership, and third-party assessments. This awards program covers activities from January 2024 to December 2024. There was no fee to enter.

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World’s Best Bank for Sustainable Finance: DBS

DBS is striving to green Asia’s economy by acting as an environmental-transition catalyst for anchor companies, mid-caps, and small and midsize enterprises (SMEs). The bank provides transition-related financing for these organizations at the corporate, project, and asset level. Among these offerings are green, sustainability-linked, and social loans and bonds, along with carbon-market financing and other products.

Standout transactions in 2024 include a loan to LG Energy to construct a plant in Poland for the manufacture of batteries used in electric vehicles. A 3 billion Hong Kong dollar (about $385.7 million) loan to the Hong Kong Housing Society will help create affordable residential projects. A 300 million Singapore dollar (about $224.2 million) bond will help the Singaporean developer CapitaLand build projects in alignment with green finance frameworks. In addition, the bank develops analytical tools to track and analyze climate data. It engages with industries (notably in the power, automotive, steel, shipping, real estate, and automotive sectors) and policy makers to chart paths to a healthier environment.       —Laura Spinale

Sustainable Finance Deal of the Year: CTBC (Project Trinity/Offshore Wind)

Seeking to help Taiwan transition to a greener economy, CTBC Bank is working with Ørsted, the world’s largest developer of offshore wind-power projects, for the construction of the 61.3 billion Taiwan dollar (about $1.9 billion) Project Trinity.

This project consists of two offshore wind farms with turbines designed to withstand typhoons, seismic activity, and other ecological vagaries. Slated to be operational by the end of 2026, the farms—named Greater Changhua 2b and Greater Changhua 4—will generate 337 MW and 583 MW of electricity, respectively. This is enough to power roughly a million Taiwanese households.

CTBC Bank acted as mandated lead arranger and bookrunner for this syndicated loan. In that capacity, it identified and recruited potential lenders and other partners. These include Cathay Life Insurance, Taiwan’s largest insurance company. Project Trinity marked Cathay’s debut investment in Taiwan’s offshore wind market. CTBC Bank also recruited Taiwan’s National Credit Guarantee Administration to act as local export credit agency for the loan package.       —LS

Best Impact Investing Solution: BTG Pactual

Brazilian-headquartered BTG Pactual has been actively expanding its sustainable funding and transactions that have environmental and social benefits. This includes developing and managing new funds with strong sustainability and impact guidelines for financial products available in local markets.

BTG Pactual raised 542 million Brazilian reais (about $95.3 million) in its impact investing fund, which achieves social and environmental benefits with strong financial returns. The fund invests in small and midsize enterprises through private equity, focusing on educational technology for low-income populations, agribusiness software, alternatives to plastic packaging, and sustainable practices within the Brazilian açaí palm chain.

The bank has also focused on reforestation efforts through its Timberland Investment Group (TIG) subsidiary, which launched in 2021 and has raised $500 million toward its $1 billion target. The group wants to restore about 133,000 hectares (about 328,650 acres) of natural forest and establish sustainable commercial tree farms on an additional 133,000 hectares. As of the first quarter of 2024, TIG had $6.9 billion in assets and commitments and nearly 3 million acres under management throughout the US and Latin America.         —Andrea Murad

Best Platform/Technology Facilitating Sustainable Finance (Non-Bank): China Central Depository & Clearing Co.

China Central Depository & Clearing Co. (CCDC) is a state-funded financial institution responsible for the custody, registration, and settlement of fixed-income securities in China. It functions as an important operations platform for the bond market, a supporting platform for the implementation of macroeconomic policies, a benchmark-services platform, and a key gateway for the opening up of China’s bond market. For example, CCDC provides issuance, registration, depository, settlement, valuation, collateral management, and information-disclosure services for green bonds, social responsibility bonds, and other sustainable finance products.

Its services can help issuers improve information-disclosure transparency and assist investors in identifying sustainable financial products. CCDC also promotes sustainable investment philosophy and otherwise contributes to the development of sustainable finance in China. As part of this work, it develops sustainable development-related indices, including China’s first green bond index, and has developed new standards for ESG evaluation.

—LS

Circular Economy Commitment Award: Nordea

The circular economy is about reusing, repairing, and recycling products and materials instead of simply disposing of them. Pulp and paper technologies provider Valmet has embraced circular economic principles in a big way. It’s now upgrading and extending the lifetime of its machines. The company has learned that modular machine design and smart engineering can often enable the same equipment’s use for other purposes. Valmet is also maximizing the use of recycled metals, reusing metals in its foundries.

Finland’s Nordea was the sole sustainability structuring adviser in Valmet’s March 2024 €200 million (about $206 million) green bond offering, making it easier for Valmet’s customers to manufacture sustainable products from renewable resources in the high-emissions pulp and paper industry. All eligible expenditures from the financing are aligned with the EU Taxonomy Regulation section 5.1 under transition to a circular economy.

—Andrew Singer

Best Bank for Green Bonds: Raiffesen Bank International

Raiffeisen Bank International (RBI) has long been considered a pioneer in green bond issuance in its native Austria. In 2018, it rolled out its green bond program aimed at encouraging sustainable lending across the RBI network of 11 Central and Eastern European (CEE) markets. Along with other banks, it participated last June as bookkeeper for Czech power company CEZ’s second green and sustainability-linked bond issue, worth €750 million ($772 million). The 4.25% bonds are due in 2032 and will be listed on the main market of the Luxembourg Stock Exchange. “With a total outstanding volume of [€2 billion] across 21 bonds in five currencies in Austria as of December 2023, RBI is the largest green bond issuer among financial institutions in the country and a regular issuer of green bonds on the international capital markets and in the retail segment in Austria and CEE,” proclaims the bank in its Green Bond Allocation and Impact Report 2024.

RBI has also developed a Sustainability Bond Framework to facilitate the issue of sustainable bonds. The bank works closely with clients in countries across the region to determine their needs and long-term environmental goals and tailor any forthcoming environmental, social, and governance (ESG) loans accordingly. In total, ESG loans to corporates over 2024 grew some 14% to €8 billion after a 16% increase in 2023 to €7 billion.    —Justin Keay

Best Bank for Social Bonds: Akbank

Akbank issued its first social bonds in 2022, and they have since proven to be suitable for its general bond issuance strategy. The bank issued some 770 million Turkish lira ($21.4 million) in domestic social bonds from 2022 to the end of 2023. The bonds incorporate three main pillars—environmental, technological, and social—that are aligned with Akbank’s Sustainable Finance Framework. The social pillar focuses on financing products and services to improve the health and well-being of communities in underdeveloped regions, facilitate equal opportunity, and generate employment, particularly among less-represented groups.

The bank has complemented its program of social bond issuance with a program of social loans. In 2023, in the wake of the devastating Feb. 6 earthquake that hit Turkey, Akbank announced the country’s first syndicated social loan, some $500 million in support of the Turkish economy, with a 367-day maturity. Thirty banks from 16 countries participated in this syndicated social loan, which was a first in Turkey.        —JK

Best Bank for Sustainable Bonds: BPI

Bank of the Philippine Islands (BPI) in 2024 issued and listed peso-denominated, fixed-rate, sustainable, environmental and equitable development bonds (SEED bonds) totaling nearly 34 billion Philippine pesos (about $587 million). The SEED bonds represent the bank’s largest thematic issuance to date. Proceeds will fund renewable energy, pollution prevention, and sustainable agriculture projects. They will further finance socioeconomic development activities, such as providing access to essential services for poverty-stricken communities.

The bank also served as a joint lead underwriter and bookrunner for Ayala Land’s 6 billion Philippine peso sustainability bond. Ayala Land is one of the largest property developers in the Philippines, and bond proceeds will be used by the company to implement energy and water-saving measures across its real estate portfolio. These measures include energy-efficient cooling systems and water harvesting/recycling systems. These and other activities bolster the bank’s goal of creating a 1 trillion Philippine peso corporate and SME portfolio supporting the UN Sustainable Development Goals. It hopes to reach that milestone by 2026.         —LS

Best Bank for Sustaining Communities: CaixaBank

CaixaBank has long been a global leader in microfinance, social bonds, and support for local communities.

The bank’s commitment was tested in October 2024, when record-breaking rainfall and flash floods battered Spain, causing casualties, massive disruptions, and economic losses, especially in the Valencia region. Caixa responded by opening a line of credit worth more than €2.5 billion for companies affected by the catastrophic weather. The bank also allowed commission-free cash withdrawals for customers with cards from other banks, for seven days, at the 785 ATMs it operates in Valencia.

In the first half of 2024, Caixa dedicated €1.08 billion to financing projects that positively impact local communities. This included its Velindre project, helping to fund the design, construction, and operation of an oncological hospital center in Wales. The bank also focused in 2024 on loans to finance projects linked to affordable housing, education, health, social and economic inclusion, and support for small and midsize enterprises in the Madrid area. —AS

Best Bank for Sustainability Transparency: Scotiabank

Scotiabank’s goals are guided by its motto: “for every future.” This wholesale bank operates in the Americas and focuses on advancing the climate transition and promoting sustainable economic growth.

The bank’s enterprise-wide goals address climate risks by financing solutions for clients in carbon-intensive sectors, advancing net-zero initiatives to reduce emissions, and reducing its own emissions. Scotia’s Climate-Related Finance Framework outlines products and services that meet the bank’s goal of providing 350 billion Canadian dollars (about $246.2 billion) in climate-related finance by 2030.

Scotia’s credit due diligence processes address environmental and climate-related risks across its lending portfolio and are integrated into its credit-risk policies. Scotia Global Asset Management has adopted sustainable investment policies and publishes annual investment transparency reports.

In its Risk Appetite Framework, Scotia uses ESG performance metrics that are also included in its annual industry review process. The climate change risk assessment evaluates physical and transition risks and a client’s awareness of climate risks as a measure of management quality. —AM

Best Bank for Sustainable Financing in Emerging Markets: Maybank

Based in Malaysia, and one of the largest lending banks in Southeast Asia, Maybank is committed to serving the emerging markets in the 20 countries in which it operates. Here are some examples: In Indonesia, the bank has embarked on a social financing program to empower disadvantaged women and support growth through its partnership with Permodalan Nasional Madani. This microfinance company, focusing on women in its work with Maybank, strives to enhance the general welfare by supporting small entrepreneurs’ access to capital, mentorship, and capacity-building programs. Understanding that a healthy environment is key to any business’ success, Maybank is working with BenihBaik.com to support the construction of organic waste facilities in three cities in Bali. These waste management facilities will provide a cleaner environment for residents while also engaging in bioconversion processes that use living organisms to transform waste into substances such as methane that can later be used in energy production.           —LS

Best Bank for Transition/Sustainability-Linked Loans: OTP Bank

OTP Bank, formerly owned by the Hungarian state, now operates across 12 CEE countries. It continues to prioritize ESG targets in all its operations and is a leader in transition/sustainability-linked loan issuance. Such loans typically incorporate ESG criteria into the loan terms. Companies that meet or exceed predefined ESG performance targets may benefit from reduced interest rates, incentivizing sustainable practices. Conversely, failing to meet these targets may result in higher interest rates, thus ensuring a strong commitment to sustainability.

Green loans to corporates (including ESG-related loans) rose 38% year on year (YoY) in the third-quarter of 2024 (over Q3 2023), while retail loans rose 17% YoY. Green loans to corporates constitute around 6% of overall loans, to retail around 1.4%. In 2024, ESG financing as a proportion of the total for OTP reached 3.7%, more than double the 1.7% reached in 2023. According to Sustainalytics’ July 2024 report, “€1.26 billion have been allocated in the categories renewable energy, green buildings, and clean transportation, with projects located in Albania, Bulgaria, Croatia, Hungary, Romania, Serbia, and Slovenia.”         —JK

Best Bank for Sustainable Infrastructure/Project Finance: Societe Generale

The sustainable infrastructure finance work of Societe Generale (SocGen) includes acting as initial coordinating lead arranger and joint bookrunner for the $8.8 billion SunZia Wind and Transmission project. The project consists of a 3.5 GW wind farm in New Mexico, along with a 550-mile transmission line to deliver this clean energy to Arizona. In Europe, SocGen served as senior mandated lead arranger for €4.2 billion (about $4.4 billion) in financing earmarked for the construction of a large-scale facility to produce green steel. Associated financing will fund the construction of a water treatment plant to supply the demineralized water necessary for green steel manufacturing. Among SocGen’s ESG-related loans are €2.6 billion in financing for the Fècamp 497 MW offshore wind farm in France. SocGen also acted as sole structuring bank for ReNew Power’s 600 MW, 35 billion Japanese yen (about $233.2 million), solar project in India; and as sole mandated lead arranger for nearly 11 billion Japanese yen in funding for Shizen Energy’s Kyushu (Japan) solar power plant.   

Global Winners
World’s Best Bank for Sustainable Finance	DBS
Sustainable Finance Deal of the Year	CTBC (Project Trinity/Offshore Wind)
Best Impact Investing Solution New for 2025	BTG Pactual
Best Platform/Technology Facilitating Sustainable Finance (Non-Bank) New for 2025	China Central Depository & Clearing Co.
Circular Economy Commitment Award New for 2025	Nordea
Best Bank for Green Bonds	Raiffeisen Bank International
Best Bank for Social Bonds	Akbank
Best Bank for Sustainable Bonds	BPI
Best Bank for Sustaining Communities	CaixaBank
Best Bank for Sustainability Transparency	Scotiabank
Best Bank for Sustainable Infrastructure/Project Finance	Societe Generale
Best Bank for Sustainable Financing in Emerging Markets	Maybank
Best Bank for Transition/Sustainability- Linked Loans	OTP Bank
Best Bank for ESG-Related Loans	Societe Generale

Country, Territory, And District Winners
AFRICA
Djibouti	iib East Africa
Egypt	CIB
Ghana	Ecobank
Kenya	Absa
Nigeria	Bank of Industry (BOI)
South Africa	Nedbank
ASIA-PACIFIC
China	DBS
Hong Kong	OCBC
India	Aseem Infrastructure Finance
Indonesia	Maybank
Japan	Morgan Stanley Japan
Malaysia	Maybank Malaysia
South Africa	Nedbank
Philippines	BPI
Singapore	UOB
South Korea	Industrial Bank of Korea
Thailand	Bangkok Bank
Vietnam	SHB
CENTRAL & EASTERN EUROPE
Armenia	Ameriabank
Czech Republic	CSOB
Hungary	OTP Bank
Moldova	MAIB
Poland	Bank Pekao
Turkey	Akbank
LATIN AMERICA
Brazil	BTG Pactual
Chile	Scotiabank
Colombia	Banco Davivienda
Dominican Republic	Banco Popular Dominicano
Mexico	Banamex
MIDDLE EAST
Bahrain	Arab Bank
Jordan	Arab Bank
Kuwait	National Bank of Kuwait
Qatar	QNB
Saudi Arabia	SAB
UAE	Emirates NBD
NORTH AMERICA
Canada	Scotiabank
United States	Bank of America
WESTERN EUROPE
Austria	Erste Bank
Belgium	KBC Group
Denmark	Nordea
Finland	Nordea
France	BNP Paribas
Germany	Commerzbank
Greece	Eurobank
Italy	UniCredit
Luxembourg	Spuerkeess
Netherlands	ING
Norway	Nordea
Portugal	Millennium BCP
Spain	BBVA
Sweden	SEB Bank
Switzerland	ING
UK	HSBC

As global trade fractures in 2025, companies face rising tariffs, supply chain turmoil, and shifting economic dynamics.

Geopolitical pressures are reshaping global economic and financial activity leading to what is commonly called a “fractured” global economy. Among other things, a fractured economy is characterized by increased trade barriers and tariffs, geopolitical tensions and shifts to specific trading blocks (like US vs China), changing investment patterns, and supply chain disruptions.

These are not new phenomena, and over time companies have responded by implementing a variety of strategies, such as rationalizing production lines, finding new markets, or near shoring sources of supply to name but a few. 

However, 2025 is not business as usual. According to the most recent outlook, in January, by chief economists at the World Economic Forum, this global fragmentation will lead to price increases for consumers and cost increases for business, for the next three years. They also agree that developments in the US will alter the trajectory of the global economy, with the majority saying that US domestic policy will bring a long-term global economic shift rather than a short-term disruption. 

Across The Border, Across The Board

In a recent interview, Suzie Petrusic, Senior Analyst in Gartner’s Supply Chain Practice, explains that with respect to US trade policy, the big difference between the way that tariffs have been applied in the past and how they are now, is the sheer scope of the tax.

“In the past it’s usually been like taking a scalpel to the tariffs—market by market,” she said. “But these new tariffs are broadly applied, so it’s actually hard for me to imagine an industry that’s not impacted.”

Impending US tariffs, and the retaliatory protectionism expected from China, the EU, Canada and Mexico will likely have highly complex, long term disruptive effects on traditional supply chains and are expected to impact industries and economies world-wide.

For example, it’s anticipated that US tariffs on EU imports will reduce Europe’s GDP by 1.5% in 2025, US GDP will fall by 1.6%, and a 25% tariff on Canadian exports will push that economy into recession. 

Global corporate investment patterns will also be impacted.  According to recent research by Ernst & Young, the negative direction of US-China relations (as reflected in the recent US ban of TikTok) will likely prompt high-profile Chinese companies to pursue IPOs in alternative markets like Hong Kong or the European exchanges. (EY Global IPO Trends 2024)

And when it comes to specific sectors, there will be winners and losers. At a recent investor conference, Ford CEO Jim Farley, described the potential impact of these sweeping tariffs on both the US automotive industry in general, and more specifically, the bottom lines of non-American automakers.

“Long term, a 25% tariff across the Mexico and Canada borders would blow a hole in the U.S. industry that we’ve never seen,” Farley said. “Frankly, it gives free rein to South Korean, Japanese and European companies that are bringing 1.5 million to 2 million vehicles into the U.S. that wouldn’t be subject to those Mexican and Canadian tariffs. It would be one of the biggest windfalls for those companies ever.” In contrast, upon the announcement of the tax on Canadian producers, American steel maker Alcoa saw a significant bounce in their stock price as investors anticipated higher prices and bloated profit margins for American steel companies. 

Levers—Which Levers?

So, what levers will companies pull in 2025 to strategically navigate through this volatile and uncertain environment? As MP Biomedicals CFO Hendry Lim explains, “Companies like ours will continue to adjust sourcing strategies to countries not impacted by the tariff,  which allows for diversify of supply and reduction of risk.”

MP Biomedicals—a manufacturer and distributer of life science, fine chemical and diagnostic products with offices and facilities throughout Europe, Asia, Australia and the Americas— has turned its eye to imports from India and Singapore. The company is also rerouting production to their other facilities before entering the US. However, this strategy isn’t clear cut. It’s a complex modelling exercise, Lim explains. 

“Of course we’ll have to weigh the freight cost versus the tariff as well as other options, looking at things like geopolitical risk, natural disasters in certain countries, market fluctuations, and then thereafter use financial models to quantify the financial impact and to develop risk mitigation strategies. We then incorporate all these factors into our forecasting. At the end of the day it’s a matter of everyone collaborating and working together to develop a strategy, to actually counteract these risks,” he adds.

Ultimately, companies will need to bring geostrategic risk into the fore of their scenario planning.

“In doing so, the most helpful thing that any C-suite executive can do, is create alignment at the C level and clarity all the way down through the organization. If you can create that clarity and alignment strategically at the C-suite then you’re able to more confidently know that your people are making decisions that are pulling and pushing towards the same goal,” she explains.

Data Beats Cash

The ability to understand risk also boils down to a company’s investment in technology, explains Rizwan Khan, Managing Partner at Acclime Vietnam, and experienced regional CFO, CIO and auditor.

“There are multiple factors that will affect production costs in this region, like Chinese investment in a company or the percentage of Chinese inputs or raw material in their products.  So overall, the tariffs that are being imposed pose a significant risk to companies in Southeast Asia as well. Vietnamese companies will need to focus more on cost reducing efficiencies to remain competitive,” Khan says. 

Competitors around the world that are exposed to the same tariffs will have to win on cost reductions, he adds. “My focus is making sure companies are utilizing technology in the most productive way to minimize those costs. In the past, we used to say that cash is king—in the current environment, data is king.” 

With so much data available, whether it is from the procurement point of view or from the production point of view, corporate strategies in a volatile trade environment require end to end visibility, he adds. 

“When it comes to technology innovations, advanced predictive and prescriptive analytic technology can help companies understand the impact of tariff-related disruptions, by helping them quantify the impact across a supply chain, or help identify specific supplier risks, or forecast changes in demand across regions in real time. This type of end-to-end visibility ensures that companies can respond to shifting market dynamics,” he says.

For now, many are still trying to figure out how 2025 will unfold when it comes to the bubbling trade war of the worlds. How companies will fare this year will depend on how quickly they can respond to emerging barriers to trade and a volatile risk environment.

Since 2016, Anne-Laure Autret-Cornet has been the CFO of OSE Immunotherapeutics, a biotech dedicated to immuno-oncology and immuno-inflammation. The Nantes, France-based company went public on the Euronext Paris stock exchange in late March 2015.

Global Finance: What has been your biggest challenge as CFO?

Anne-Laure Autret-Cornet: In the biotech sector, we are always fundraising. In Europe, it is even more challenging, not only because of the economic and political challenges, but also because the markets have been rather sluggish since 2023. That said, OSE managed to secure funding until first-quarter 2027. Of course, the early stages of the COVID-19 pandemic were very challenging. The uncertainty and rapid changes in the global market required quick adaptation and strategic financial planning to ensure the stability and continuity of our operations.

GF: Where has the bulk of your energy and time been directed in the last year?

Autret-Cornet: Along with our CEO and chief business officer, I was focused on securing funding for our ongoing and upcoming research and development projects. We received a grant of €8.4 million in non-dilutive public funding to support a Phase 3 clinical trial of our cancer vaccine, Tedopi, in lung cancer. In addition, we signed a major strategic partnership with AbbVie last February. This involves the development of OSE-230, a novel monoclonal antibody, and included an upfront payment of $48 million with potential milestone payments and royalties. And we have ongoing important collaborations with other companies such as Boehringer Ingelheim and Veloxis Pharmaceuticals.

These partnerships underscore our commitment to advancing innovative therapies and highlight the value of our research and development capabilities. All this effort last year, in addition to some positive clinical trial results, has increased confidence in our company, resulting in a solid financial position until 2027 and a stock price increase of around 69% year-on-year.

GF: How important is having a top team?

Autret-Cornet: In small companies like ours, resources are stretched, and so it is critical to have the best talent to achieve our strategic goals. I aim to bring on board team members who not only have the right skills and experience but also align with our company values and culture. As CFO, I also head up human resources, legal, and information technology—so it’s critical to have people who are highly accountable, incredibly engaged, and collaborate well across the organization.

GF: Can European governments do more to boost innovation?

Autret-Cornet: European countries can increase investment in research and development, provide tax incentives for innovative companies, and foster collaboration between academia and industry. We are seeing an increased use of artificial intelligence to speed up drug discovery and development processes. OSE recently announced a strategic collaboration in this space with Scienta Lab, a leader in AI-driven precision immunology.

GF: How are you making use of AI in finance at OSE?

Autret-Cornet: AI has been implemented for two years in our financial system. Already we have seen how it helps improve efficiency, accuracy, and decision-making processes: for example, in predictive analytics, scenario modeling, risk management, and automating routine tasks. I see AI evolving to become an integral part of financial operations, providing deeper insights and enabling more strategic decision-making. Beyond the AI tools we are using in our research and development processes, we are deploying tools that help employees in some of their daily tasks, and I’ll be keeping an eye out to see what more we can do.

GF: What keeps you up at night?

Autret-Cornet: Ensuring the financial health and sustainability of the company is always on my mind. Additionally, staying ahead of market trends and regulatory changes is a constant challenge.