Since assuming office at the peak of the republic’s inflation crisis in 2022, CNB Governor Aleš Michl has been implementing a unique and rather unorthodox strategy to combat price hikes.

First, he put a damper on further interest rate hikes, saying he would promote a well-communicated stance of higher rates for longer rather than the former “rushed, volatile, ad-hoc policy moves and experiments.”

Michl, formerly a co-founder of an algorithmic asset-management fund, went on a media campaign focused on lowering inflation expectations. By talking to Czech tabloids and through social media outlets including Instagram, Facebook, and X (formerly Twitter), he communicated to the public that the problem was a supply chain bottleneck that would reverse as soon as the post-Covid crisis demand for goods returned to normal.

The height of the campaign came when Michl appeared on a Facebook post by the CNB using a ketchup bottle to explain his analysis.

“It’s like opening a new ketchup bottle,” he said, “turn it over and nothing comes out, the ketchup is stuck in the bottle. This shortage of goods led to rising prices. When the problems in the supply chains are solved and demand normalized, there is a surplus of goods: similar to when the ketchup finally flows out of the bottle, but much more than you wanted.”

The other part of Michl’s plan was to strengthen the Czech koruna, on the theory that a heavy flow of euros into the economy at a higher price was partly to blame for the price increases.

Despite hitting the 2% inflation target twice in the last three readings, Michl still sees a long way to go before claiming victory over inflation. “My work will be judged by long-term results and not only by inflation numbers this year,” he predicts. The market, however, sees plenty of room for further rate cuts.

Less than a year ago, Ebrard, a high-profile political heavyweight who served as Mexico’s secretary of foreign affairs under outgoing President Andrés Manuel López Obrador (AMLO), was threatening to Sheinbaum’s and López Obrador’s Morena party to run for the presidency on his own. He had previously lost the 2012 race for the Moreno nomination to AMLO himself.

But after the landslide victory that will make Sheinbaum the first woman and first Jewish person to govern Mexico in its 200-year history, Ebrard took a step back and joined the governmental team.

The markets saw the choice as positive, given that Ebrard has a more moderate profile compared to Claudia Sheinbaum’s more left-wing stance. Since the new minister’s nomination, the Mexican peso has gained significant ground against most G7 currencies; Mexican stocks have also trended upward.

Among his duties, Ebrard will oversee the 2026 review of the United States-Mexico-Canada Agreement (USMCA), a pivotal moment that could shape Mexico’s economy over the next decade.

“There is a kind of protectionist consensus in the US,” he said in his first interview in his new post. “That’s why the review of the trade agreement with the US, and the trade relationship with [the US and Canada] in general, could be more complex.”

Ebrard will also need to manage China’s growing interest in Mexico, says Eduardo Ordóñez, an independent political and security risk analyst based in Mexico City.

“China is gradually investing in northern Mexico,” he notes, “diversifying its supply chains and trade routes along the border with the US. Keeping foreign direct investment growth, while maintaining a positive and cooperative relationship with the US and Canada will be the challenge.” Experts also expect nearshoring to be the key concern for Ebrard and Sheinbaum. To support growth in that area, Ordóñez says, he will need to “bolster investment to modernize infrastructure in ports, land transport, as well as help cargo carriers modernize their fleets.”

With a total green bond issuance worth $131.3 billion (about ¥0.94 trillion) in both domestic and international markets, the country nearly doubled the second place, Germany, which issued roughly $67.5 billion during the year.

The milestone comes as the market recovered from a sharp drop in 2022 due to increasing interest rates around the world. According to data from S&P Global, total green bond issuances were up 10% year-over-year in 2023, totaling $575 billion, largely pushed by a rebound in Europe.

China saw a 3.5% YoY drop in volume compared to 2022. But the slump wasn’t nearly enough to counter the country’s massive leadership.

The US, first place in the global green bond market until 2021, now ranks third in the global ranking with a total of $58.3 billion issuance in the full year 2023, according to Climate Bonds Initiative data.

The UK, the fastest-growing country in the space, leapfrogged from seventh to fourth place in the year, issuing $32.6 billion in green bonds that adhered to CBI criteria.

2024 year-to-date numbers warn, however, that keeping the leadership could be more challenging than it seems for China this year. According to data from S&P Global, Q1 green bond sales in the country have slumped a massive 46%.

Nonetheless, experts say there’s a lot of untapped potential in the country, if only there were buying interest. “The issuance of green municipal bonds as a green financing mechanism is not being proactively pursued due to a lack of awareness and capacity to expand financial resources and instruments,” explains Liu Wenjie, senior analyst at Greenpeace in East Asia. Meanwhile, expectations are that the global green bond market will post solid YoY growth in 2024 on the back of subsiding interest rates. While record numbers are not expected until 2025, S&P Global sees green, social, sustainability, and sustainability-linked bonds accounting for 14% of the total debt issued in the year.  

After years of rising debt, the country has now posted four consecutive months of fiscal surplus, the first in 16 years. It now eyes a full year of positive balances. The country also posted a positive financial surplus, including interest payments, in April. Against a current 40% interest rate, the figure reached 17.4 billion pesos ($19.6 million).

The International Monetary Fund (IMF) has lauded the government’s economic blueprint, with its combination of austerity policies and lowering interest rates. It describes the current results as the first fruits of “an ambitious stabilization plan, anchored on a large upfront fiscal consolidation, along with actions to rebuild reserves, correct relative price misalignments, strengthen the central bank’s balance sheet, and create a simpler, rules-based, and market-oriented economy.”

In Argentina’s case, lowering interest rates appears to have helped dampen consumer price rises. That’s because the main driver of currency devaluation was the country’s ballooning debt, accentuated by a 50% interest rate benchmark.

Recognizing the country’s improved outlook, the IMF has agreed to release the next tranche of loans under a bailout program with Argentina. The payout, scheduled for release later this month, stands at roughly $800 million.

The “consensus is the government will achieve a full year of financial surplus in 2024, or, failing that, a primary surplus,” says Ricardo Amarilla, economist at TC Economatica. He cautions, however, that more than 60% of Argentina’s expenses usually hit in the second half of the year, meaning the government will probably need to double down on austerity and inflation reduction to keep the plan moving. “Among the main challenges are stopping the use of inflation as a mechanism to adjust public spending,” Amarilla says, “and also achieving political agreements that result in laws with genuine spending cuts.”

Central American economies have flourished in the pandemic’s aftermath due to the region’s lower-than-average inflation, allowing central banks to impose more-accommodative policies than larger economies worldwide.

However, the region received a further boost in 2023 owing to record-breaking remittances and an improving labor market, buoyed mainly by the near-shoring boom, thriving tourism and continued profitability across the commodity spectrum. As a result, Central America’s combined GDP is estimated to have grown 3.5% year-over-year (YoY) in 2023, significantly above the global average of 3.1%, according to the UN Economic Commission for Latin America and the Caribbean (Eclac).

Panama stood out as the primary winner among the region’s leaders, boasting impressive 6.1% GDP growth last year. Costa Rica followed with 4.9% growth, according to Eclac estimates.

In the banking sector, continued efforts toward further digitalization—one area in which the region still lags—and commercial loan portfolio growth were the main drivers of profitability among the more prominent players.

With a strong presence in Panama and Costa Rica, BAC Credomatic is our Best Bank in Central America for the fourth year in a row and in its home country of Costa Rica for the sixth year running.

The bank rode macroeconomic tailwinds to deepen its leadership and post significant growth in all its operation. It posted solid 27.2% YoY net profit growth for its regional operation, driven mainly by increasing loan profitability and investment-bankings trength in Costa Rica and Panama.

These figures were boosted by BAC’s focus on small and midsize enterprises (SMEs), where the bank notched impressive 22% growth last year. Increased digital banking integration drove these remarkable numbers, which jumped 50% that year. BAC’s personal banking sector also grew, to 4.7 million customers at the end of 2023.

The numbers received a significant push from the bank’s money-transfer app, Kash, which helped propel a 340% jump in new digital accounts. This was driven mainly by increased activity in BAC’s home country, Costa Rica, where the bank tested pioneering features such as Apple Pay and the integration of artificial intelligence into its financial services.

Improving digital integration and growth on the SME-loan front was also the secret behind a fantastic year for the Best Bank in Guatemala, Banco Industrial. Amid high political challenges, the bank increased its market share in the country to 29.2% in total assets, 29.1% in total net loans, 27.6% in total deposits, 23.6% in shareholder equity, and 28.4% in net income.

Amid the tightly disputed Salvadoran market, the 2024 winner, Banco Cuscatlán, focused its growth operation on corporate and mortgage loans, where it posted the highest growth rate in the country over the past three years.

In Belize, the winner, Belize Bank, grew its investment and loan portfolio to maintain its position as the country’s largest bank in assets and profitability. It held a commanding 1.9 billion Belizean dollars (approximately $939 million) in assets as of July 2023, according to the Central Bank of Belize.

By leveraging its position as the leading bank in Honduras in terms of assets and profitability, Banco Ficohsa was able to grow its asset base by 13.5% YoY, the best in the nation.

The secret behind Ficohsa’s above-average performance is continued investment in its digital offerings. Moreover, by partnering with more than 30 remittance companies, Ficohsa took advantage of booming remittances.

In Nicaragua, Banco LAFISE Bancentro met and surpassed several key milestones, demonstrating continued growth and resilience. Among the bank’s main achievements has been a double-digit growth rate (14.4%) in its loan portfolio, significantly surpassing the estimated real GDP growth rate for 2023. These numbers were mainly buoyed by the bank’s above-average penetration into its country’s SME sector, which makes up nearly 70% of LAFISE’s loan portfolio.

Finally, Banco General returned as the Best Bank of Panama after an absence riding high on its digital offerings and expanded client base.

It was an overall solid year for Latin American economies. Tailwinds that helped to push economic activity in the region to better-than-expected levels included the lowering of interest rates in some of the region’s largest economies—such as Brazil, Mexico, and Chile—and increased trade on the back of the near-shoring boom stemming from the US.

However, lower commodity prices during the year; lingering inflation in Argentina, Colombia and other key geographies; continued political uncertainty; and a strong base effect from 2023 somewhat balanced things out to the downside on the GDP front.

According to the International Monetary Fund (IMF), the region (including the Caribbean) grew an estimated 2.5% last year, underperforming the 2023 global economy’s 3.1%.

Despite the volatile backdrop, the region’s banking sector stood firm, displaying above-average growth. This was mainly due to the improvement of nonperforming loans in the year’s second half, consequent on lower interest rates and solid activity across the investment banking spectrum.

Mexican banks notched another year of record profits, garnishing nearly $13.33 billion, representing an actual annual increase of 10%, according to data from the Banco de Mexico.

In the region’s largest market, Brazil, the country’s five largest banks saw solid 1.9% year-over-year (YoY) profitability growth, amounting to a staggering approximately $19.35 billion in profits. However, a drop in proceeds for historical powerhouses such as Bradesco and Santander led to a mixed overall outlook. Elsewhere in the region, results were mixed, with above-average profitability in Argentina helping balance the sharp drops in Chile and Colombia.

Despite the challenges of a volatile year, BTG Pactual, our winning bank for the region and in its home country of Brazil, performed exceptionally well. The giant achieved robust 25% YoY profitability growth, putting it above the average. The bank reported best-in-breed growth in key business lines during the year, with new customer acquisition in corporate and retail business, new product lines and record-breaking investment banking proceeds helping pave the way.

Amid those advances, BTG’s Corporate & SME Lending division jumped, totaling approximately $1 billion in the fourth quarter, an 88% increase YoY. The credit portfolio reached roughly $34 billion, with $4 billion in lending to small and midsize enterprises (SMEs).

In the investment banking spectrum—the bank’s historical cornerstone—BTG ranked first in the number of M&A deals in Brazil and in Latin America. It was also the top bank in the region for the year in terms of generated equity capital markets volume.

The bank achieved a return on average equity (ROAE) of 22.7%, with adjusted net income reaching approximately $2.8 billion, reflecting 61% growth compared to the previous period. As a result of the impressive year, the Brazilian giant’s assets under management reached approximately $288 billion, with a strong net inflow of $36.9 billion in 2023.

Amid the impressive year for banks in Mexico, Banorte surpassed its competition, posting growth in nearly all of its credit portfolios. As a result, its profit exceeded $9.5 billion in 2023, 15% more than in 2022. Meanwhile, its net interest income proceeds increased by 18% YoY to $6.4 billion, and nonfinancial income rose 19% to $895 million.

The strong loan demand from the near-shoring boom was added to Banorte’s performance. The bank’s mortgage loans grew 12% annually, reaching $14.6 billion; while automotive loans increased by 32%, with a balance of around $2.4 billion.

Moreover, the bank solidified its digital leadership by ending the year with 8.7 million digital customers. As a result, product sales through the bank’s digital channels surged from 7% of the total in 2020 to 44% in 2023.

In Argentina, amid the country’s inflationary nightmare and political instability, the role of commercial banks couldn’t have been more pivotal to the functioning of the economy.

By providing stability to its clients during this period, Banco Galicia notched impressive growth in all key aspects of its operation.

At year end, the bank reported a 25% increase in net profitability, up from the previous quarter’s 5% increase This resulted in an annualized return on average assets of 3.5% and an ROAE of 17%.

The above-average numbers were also driven by Grupo Financiero Galicia’s fintech and digital payments subsidiary, which posted a four-digit YoY growth in net profitability.

Due to the Chile’s muted economic growth and deteriorating labor market, Banco de Chile takes the award for displaying best-in-class resilience. While the country’s total average profits for the industry dropped 20.7% in the year, Banco de Chile secured a leadership position with best-in-breed financial planning while posting a net profit of $1.4 billion.

In Colombia, banks had an even harder time securing profitability amid a nearly 50% YoY drop in proceeds. The trend was mainly driven by economic deceleration and an increase in nonperforming loans. Against this backdrop, Banco de Bogotá, winner as Best Bank in Colombia, notched a solid $248 million in proceeds. At he same time, the bank’s assets and consolidated loan portfolio, which grew, respectively, 5.4% and 10.8% in the year.

Banco Itaú Uruguay and Banco Itaú Paraguay take our awards as the best banks in those countries. Both are our winners for the second consecutive year, displaying their continued push to aggregate market share in Brazil’s neighboring economies.

In Paraguay, the bank’s total profitability represented 36.2% of the total market, an impressive leap from the 26.9% posted in 2021. Among the bank’s main initiatives last year was the introduction of PIK, a payment solution offering SMEs, and independent professionals and entrepreneurs, a simplified digital payment method.

In Uruguay, Itaú took advantage of the country’s solid growth in the banking industry to continue expanding its leadership, with a 15% increase in its client portfolio for the year.

In Bolivia, banks’ loan portfolio decreased by 2.5% compared to 2022, primarily due to the increasing delinquency rate, which jumped from 2.1% in 2022 to 2.8% in 2023. Despite that, Bolivian banks were able to post an increase in solvency, profitability and liquidity rates.

Against this backdrop, Banco Mercantil Santa Cruz retained its leadership in the country, growing its total assets to $6.1 billion, an increase of $2.2 million since 2022. This represents a dominating gross portfolio market share of 14.4% and 15.5% of deposits in the country.

According to the Superintendency of Banking, Insurance, and Private Pension Funds of Peru, the 17 banks operating in the country recorded an 8.8% drop in their profits at the end of 2023 compared with the previous year. Despite that, Banco de Credito del Peru, the winner as Best Bank in Peru, posted record-breaking profitability in the year under a solid 2.6% return on assets.

Venezuelan banks were able to notch impressive 8.9% profitability growth for the year. Amid the hot market, Mercantil Banco Universal upped its game in the savings account segment at the end of the second half of 2023, growing its market share in the country from 13% to 16.1%. Moreover, according to its latest financial report, the institution stood out in the same period by nearly doubling its loan portfolio, achieving eye-popping growth of 98.1%.

In Ecuador, increased political turmoil resulted in a challenging year for economic activity, with GDP falling short of estimates, albeit rising at a 1.3% yearly pace. Against this backdrop, the best bank in the country, Produbanco, managed to leverage its penetration in the commercial lending spectrum to boost its offerings. As a result, Produbanco’s total assets increased an above average 7.1% compared to the previous year.

According to International Monetary Fund estimates, the region (excluding Guyana, which grew an eye-popping 39.2% this year) expanded by 9.8%, exceeding the global growth rate of 3.1%.

Among the region’s leading economies, Antigua and Barbuda’s solid 5.7% in GDP activity and Barbados’ 4.4% expansion have helped pave the way for the region’s robust activity.

The hot regional economic activity drove profitability upward and provided a solid foundation for the region’s financial industry. This was mainly due to increased loan portfolios, higher interest charges, and improved delinquency rates in the commercial loan sector.

Against this backdrop, Banreservas takes the award for the Best Bank in the Caribbean and in its home country, the Dominican Republic, for the second year running. Taking advantage of the favorable year to post an impressive 11% net income growth year-over-year (YoY), the Dominican-based giant maintained delinquency rates at a historic low of 0.66%.

The bank’s total deposits reached $15.1 billion in 2023, surpassing 2022 by a staggering $1 billion. This achievement positioned the bank as a leader in the Dominican banking system, commanding a 38% market share.

Additionally, Banreservas made history by becoming the first bank in the Dominican Republic to achieve a historic benchmark in its loan portfolio, surpassing $8.7 billion. As a result, the bank solidified its position in its home market by capturing 36.9% of the market share in assets, totaling $19.6 billion.

Canada-based Scotiabank dominated the year in the Caribbean islands, taking home five awards: for the Bahamas, Barbados, Jamaica, Trinidad and Tobago, and for Turks and Caicos.

In the Bahamas, the bank’s profitability reached its highest point in 15 years, with earnings soaring by nearly 46% compared to 2022. The trend was driven mainly by a 37-basis point (bp) YoY rise in total loan market share and a 49 bp growth in total deposit market share.

Scotiabank Barbados focused on improving digital inclusion by bolstering its digital offerings. As a result, the bank’s digital adoption grew to 244,000 transactions, a 57% YoY increase. On the financial side, these initiatives led to profitability nearly doubling YoY, with return on equity (ROE) jumping by 9%.

In Jamaica, the Canadian bank’s strong financial performance was driven by growth across all core business lines, resulting in an impressive net income of $17.3 billion for the fiscal year ending October 31, 2023. This marks a $6.9 billion increase in total profits, 67% over the previous year.

Focusing on digital offerings also proved a winning strategy in Trinidad & Tobago, where the bank posted a 7% YoY growth in its loan portfolio, a 14.95% ROE and a 44.7% operational efficiency ratio.

The Canadian giant’s best performance was in Turks & Caicos. Boosted by red-hot loan activity and a solid delinquency ratio, the bank achieved a stellar ROE of 138% and a 203% increase in net profit, reaching $27 million.

FirstBank took home twin awards for Puerto Rico and the US Virgin Islands. In the former, the bank continues to leverage its 2020 acquisition of Santander’s $5.5 billion local assets to deepen its leadership position. In the latter, the bank took advantage of soaring tourism activity to boost its loan portfolio by 11.8% YoY.

Our Cayman Islands and Bermuda winner, Butterfield Bank, focused on digital inclusion to garnish impressive metrics for its customers. The bank posted a solid 24.2% ROE and an 58.1% core efficiency ratio. As a result, the bank’s net interest income reached a staggering $367 million and non-interest income $212 million.

According to Dealogic, total M&A volumes climbed 30% globally, driven by the US and Europe, where it jumped a hefty 59% and 64%, respectively.

“Over the last two years, company valuations have come down due to higher rates. That has resulted in a better price point for acquirers and fewer financing options for smaller companies. Now, with the prospect of rate cuts, quality companies can have a more padded valuation, and their ability to access funding from the capital market is also better,” says Li Watsek, an analyst at brokerage firm Cantor Fitzgerald.

The remarkable activity was buoyed by a stack of large deals, primarily in technology, finance, energy, and life sciences. Among those sectors, technology led the rise, with an impressive 42% year-over-year jump to a total of $153.8 billion.

Among the most prominent deals so far are the $32 billion Synopsys takeover of Ansys, Capital One’s $35.3 billion buyout of Discover Financial, and British Pharma giant AstraZeneca’s acquisition of Fusion in the thriving oncology field.

The thriving Q1 activity in several corners of the market has prompted Morgan Stanley to raise its M&A growth outlook for the full year to a hefty 50%. “We think that this ‘winter’ for mergers and acquisitions (M&A) is thawing, and activity is set to return cyclically and secularly,” the behemoth bank said in a note to clients.

M&A activity has also rebounded impressively in Japan and India, mostly on the back of the two countries’ red-hot stock markets this year. In the former, companies capitalized on last year’s thriving activity to post continued growth. In the latter, two mega telecommunications and infrastructure deals of over $1 billion helped push the market to a hefty 78% jump in deal value in January alone.

However, China and Brazil are still the largest economies that have yet to catch up.

Fueled by booming oil production and rising export profitability, Guyana’s GDP grew an eye-popping 38% in 2023. This follows an even heftier 63% increase in 2022 as the Guyanese economy began to boost its profile on the world stage.

The 800,000-habitant nation’s lot began to change in 2015 when ExxonMobil announced the discovery of the Liza-1 well, a massive oil and gas field off Guyana’s Atlantic shore. Impressed by the reservoir’s potential, the Houston-based giant, in partnership with the local government and companies including Hess Guyana Exploration and CNOOC Petroleum Guyana, focused on exploring the larger region known as the Stabroek Block.

Drilling up to 18,000 feet below sea level, the consortium found several other massive oil and gas fields, vastly increasing the region’s projected output. “The Stabroek Block may be one of the most unprecedented exploration blocks of all time,” says Schreiner Parker, senior vice president and head of Latin America and the Caribbean at Rystad Energy, and energy research firm.

As oil prices jumped in the aftermath of the Covid-19 pandemic and the US and Europe sought alternatives to Middle Eastern and Venezuelan oil, Guyana’s economy took off due to the discovery of the Liza-1 oil well—growing an average of more than above 40% a year since 2020.

Looking ahead, global research firm BMI expects the combination of further oil discoveries, rising output and high geopolitical tensions to generate further GDP growth of 115% for Guyana by 2028, the fastest in the world. That poses the welcome challenge of transforming the nation’s newfound oil bonanza into sustained progress for its population. Getting there, however, will mean avoiding “Dutch disease”: the tendency of boom tied to a single commodity to stifle activity for the country’s other resources due to overall rising domestic prices.          

But one corner of the market isn’t riding the boom: Sustainability-linked bonds (SLBs). According to Dealogic, there were only three transactions of such kind in the US year-to-date as of mid-March. Globally, the trend is similar, with SLBs in 2023 down 51% YoY. This contrasts with corporate green bonds, which had surged by 48% this year as of March 12, reaching a total of $52.6 billion.

Syed Hasan Jafar, associate dean of graduate programs at Woxsen University in Hyderabad, blames the subpar performance of SLBs on their complex nature and the lack of standardization as to key performance indicators. “Due to uncertainties regarding the legitimacy and significance of these instruments, many investors are still reluctant to adopt SLBs fully,” he says. Some hope that the SEC’s new climate disclosure guidelines will lead to a more mature market for sustainability-linked products. (related story in Trends p. 80)

Meanwhile, in the US, at least, among the corporate bond market’s many flourishing corners, convertible debt is getting attention, particularly for high-flying mid-cap tech companies like Super Micro Computer, MicroStrategy, and Lyft. “The favorable landscape allows firms to borrow under more-advantageous conditions, securing lower spreads above risk-free rates, indicative of cheaper capital compared to periods of market stress,” explains Gaël Fichan, head of fixed income at Swiss private bank Syz Group.

Hasan Jafar warns these issuances carry significant risk: “Convertible debt can lead to dilution of ownership if the company’s stock price rises significantly.” Syz’s Fichan agrees: “Those [convertible bonds] issued by smaller tech companies could face increased vulnerability due to potential tight funding scenarios or abrupt market corrections.”