Citi Peru Issues First Letter of Credit in Renminbi
Citi Peru has issued the first letter of credit (L/C) denominated in renminbi (RMB), the currency used in the Chinese market, more commonly known as the yuan (CNY).
The bank said that the issued enabled an important client in the retail sector to significantly improve conditions for its imports.
Citi Peru is the first bank in Latin America to issue L/Cs in RMB. “Our mission as a financial institution is to offer specialised, added-value financial solutions, and to this end we took the step of becoming the first to issue L/Cs in this currency. This is a way for us to offer added benefits to our clients who trade with China,” said Mauricio Schwartzmann, head of treasury and trade solutions at Citi Peru.
The Chinese government launched an effort to internationalize its currency in July 2010, opening an offshore currency market (CNH) in Hong Kong. Taiwan, Singapore and London help facilitate commercial agreements in RMB according to time zone.
While Citi has made payments in RMB for its clients in Latin America since 2011, this is the region’s first L/C denominated in Chinese currency. L/Cs are one of the payment methods most commonly used by Latin American companies in commercial transactions with China. In March 2012, Citi launched a new Latin American trade desk in Asia, based in Shanghai, China, to help link its Latin American clients with Asia.
Trade between China and Latin America grew 8% to total more than US$255bn in 2012, making Latin America the second leading destination for Chinese investments. Chinese sales to Latin America grew by 11%, reaching US$131bn, compared to a 5% increase in Latin American exports to China, which totaled US$125bn. Peru accounted for approximately 6% of this total trade. As of July 2013, China is Peru’s second largest trading partner, with commercial ties totaling US$8.3bn.
The first issue of an import L/C in RMB marks a new trend in commercial transactions with strategic partners such as China. “Even though our foreign trade strategy with China remains solid and enjoys a positive future outlook, Peruvian companies should still move quickly to catch up with global trends,” said Othman Gamero, Citi’s structured trade sales head for Latin America.