interesting market for Western lessors, Brendan
Malkin interviews Stephan Knuppertz, the head of
Heidelberg Financial Services, about operating in the country
LL: Financing activities in the Brazilian
market represent a significant part of Heidelberg Financial
Services, worldwide activities. What is the reason for
this?
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SK: Heidelberg typically tries to broker with local and
international financing partners to help our customers acquire our
equipment. The fact that we have a larger book in emerging markets,
including Brazil, within our own captive finance company,
underlines that these markets are still in a developing mode from a
financing perspective.
LL: So that means that financing solutions are
not available for your customers?
SK: I would say competitive financing solutions have been hard
to get in Brazil. This country has seen some lagging interest from
the leasing industry over the past years. There was a much stronger
strive by European leasing companies to enter Eastern Europe or
China rather than the biggest and rapidly growing Latin-American
market.
Cross-border currency regulations and registrations with the
Central Bank also create a rather complex environment. Certainly
there was also a general fear to enter into cross-border structures
in a foreign currency due to the fluctuations in the local
currency.
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By GlobalDataLL: Which is currently seeing some turmoil
again. What is your experience in the payment performance under
these circumstances? Do customers struggle?
SK: Our financing experience in emerging markets, including in
Brazil, dates back 10 years, so we have gathered quite some
experience on how to manage these kinds of risks. Whenever there is
a major devaluation in a local currency, having close cooperation
with the customer to overcome this problem is a key strength a
successful financier has to deliver.
A strong supporting fact is also how quickly customers are able
to adapt to the new environment. Adapting in this way helps to
stabilise the situation – even if the currency continues to be
weak.
LL: Did this lead to losses from defaulted
deals?
SK: We could not avoid some repossessions, but in a market like
this it is all about structuring and having adequate local
remarketing possibilities. Standard terms include an adequate down
payment and substantial nationalisation costs to be paid by the
customer up front. This means that the loss potential is rather
limited as we have always sold our used machines locally.
LL: With this experience and potential in the
market what are the next steps?
SK: Our largest financing partner has just opened its local
operations in Brazil, and another key player is doing cross-border
leases from Germany. I think our experience has helped them to make
this move. Brazil will also be a key market for vendors going
forward. It offers a great asset-based approach with good margins,
and competition among leasing companies is still small. Where else
can you find that these days?
