Scott Thomson, the Chief Executive Officer of Bank of Nova Scotia, has stated that the bank's extensive international operations are poised to gain from a significant political realignment in Latin America, coupled with increasing United States engagement in the region.
A "Lost Decade" and a New Political Landscape
Speaking at the Royal Bank of Canada's annual Canadian bank CEO conference on Tuesday, Thomson reflected on what he termed a "bit of a lost decade" for growth in the region. He now sees a positive shift. He highlighted political movements towards the right or centre-right in nations like Chile, Colombia, and Peru. Furthermore, he pointed to a "very business-friendly administration" in Mexico as supportive of stronger economic expansion.
Thomson explicitly linked recent events in Venezuela to this broader trend. US forces ousted Venezuelan President Nicolas Maduro over the weekend, an action Thomson views as part of a larger pattern. "Longer-term, this is a good thing for the Western Hemisphere. It's a good thing for the US. It's a good thing for the Bank of Nova Scotia," he asserted.
The "Trump Doctrine" and Competitive Considerations
The CEO also referenced the so-called "Trump Doctrine" as a favourable factor for growth. This modern interpretation of the 19th-century Monroe Doctrine was outlined in a US national security strategy late last year. Thomson believes this renewed US focus on hemispheric dominance will prove beneficial in the long run.
However, this shift also brings challenges. As former US President Donald Trump pledges to reopen Venezuela's oil industry, Thomson warned that Canada must respond. Both Canada and Venezuela produce heavy crude, potentially increasing competition to supply specialized refineries in the US Midwest. "Having another pipeline here for Canada, I think, is really important," Thomson said, expressing hope it would accelerate major national infrastructure projects.
Scotiabank's Stakes and Analyst Caution
Toronto-based Scotiabank has the largest proportional international exposure of any major Canadian bank. While the lender exited Venezuela back in 2014, it maintains significant operations in Mexico and holds a 20% stake in Colombia's Banco Davivienda SA.
Not all observers share Thomson's optimistic outlook. TD Cowen analyst Mario Mendonca offered a contrasting view in a report on Monday. He suggested Scotiabank might adopt a more cautious stance on commercial lending in Latin America. Such restraint, Mendonca warned, could delay loan growth and impact the bank's ongoing turnaround plan, which is now in its third year.
Despite this analyst caution, Scotiabank's leadership appears confident. Thomson concluded that the converging trends of political change and US policy should benefit Scotiabank's business over the next several years, marking a new chapter after a prolonged period of sluggish regional growth.
