When it comes to banking, Latin Americans are the inverse of their northern neighbours. Consumers in Canada and the United States are loaded with debt, but the opposite is true in many markets to the south.
As Bank of Nova Scotia seeks to expand its large footprint in Latin America, Canada's third-largest lender is looking to a mostly younger population with much more financial flexibility to fuel that growth.
In countries such as Peru, Colombia and Mexico, where demographics skew younger, and the middle class is expanding, Canada's third-largest bank is laying the groundwork for the next several years of expansion.
"There is a very good opportunity for us for loan growth," said Wendy Hannam, executive vice-president of Latin America for Scotiabank. "The population in Latin America is very young and is entering a credit accumulation stage."
Speaking by phone from Lima, where Scotiabank was hosting analysts and investors at a conference highlighting its long list of Latin American investments over the past decade, Ms. Hannam said the bank is also confident it won't have to move outside its comfort zone for risk as it courts new borrowers in those countries.
Scotiabank is Canada's most international bank, with operations in more than 50 countries. Since 2007, the bank has made more than 20 international acquisitions in Latin America and Asia, worth about $6-billion.
Scotiabank has been expanding aggressively in Latin America in recent years, hoping to make inroads in countries like Peru, where banking penetration is lower than in North America.
The bank first expanded to Peru since 1997, when it acquired a 35-per-cent stake in Banco Sudamericano. It has since executed a number of acquisitions, buying the remainder of Banco Sudamerico, purchasing a majority stake in Banco Wiese Sudameris, and purchasing AFP Profuturo. Those properties now operate as Scotiabank Peru, and include the bank's Financiera CrediScotia business, which provides micro-finance consumer lending.
Peru has one of the lowest consumer debt levels in Latin America, with loans representing 26 per cent of the country's gross domestic product. That compares to 45 per cent in Colombia and 71 per cent in Chile.
Peru also has one of the youngest populations in the Western Hemisphere, with 30 per cent of its population under the age of 15. That compares to 16 per cent in Canada, 20 per cent in the United States, 29 per cent in Mexico and 25 per cent in Argentina.
Banks haven't been the only ones noticing. Peru has seen an explosion of retailers expanding inside the country over the past decade, including McDonald's Corp. and Starbucks Corp. opening more locations, and numerous new financial players moving in. The growth has been driven by the expanding middle class. The middle class made up 57 per cent of Peru's population in 2011, compared to 48 per cent in 2003.
Scotiabank now has 281 locations in Peru, up from 149 in 2007, along with 557 automated teller machines. However Scotiabank executives believe banking penetration is low in the country, and there is room to expand.
The Canadian bank is Peru's third-largest lender, with 16 per cent of the loan market. The Peruvian operations hold about $8.1-billion worth of deposits, compared to $4.4-billion in 2007. The business made $316-million in 2012, on revenues of $1.2-billion.