Latin America’s banking sector is entering a new era that will likely see double-digit growth in assets and profits in most major countries.¹ These advances will be driven mainly by four factors: GDP growth rates in the 4 to 5 percent range, falling interest rates, lengthening debt maturities, and the higher purchasing power of a growing middle class.

Meanwhile, competition is becoming more intense. The multinationals, having taken notice of the new opportunities, are increasing their investments across the region in hopes of taking market share from the leading local banks. Entrants with specialized business systems have the same goal; in particular, retailers have become quite aggressive in the consumer finance and credit card markets.

Fundamental changes that occurred during the 1980s and ’90s across regulatory, demographic, and political dimensions propelled this positive outlook. As a result, the macroeconomic variables that are critical to the development of the banking sector—such as a growing GDP per capita, lower government fiscal deficits, and falling long-term government bond rates—are already improving significantly.