The Business Year Special Report
Francis Stenning, CEO, Lima Stock Exchange (BVL)
To inspire greater confidence, BVL is motivating companies to become more open and transparent and be properly regulated.
How would you assess the impact of COVID-19 on the capital markets in Peru and BVL’s operations?
I have mixed feelings because on the one hand, we are affected by the economy’s performance, and the performance of the economy was critical this year. We had a two-digit contraction of GDP and that definitely has an impact on all our re-insurers and the perspectives of most of our stocks, trade, ratings, and debt. Hence, the impact has been severe on that side, though the other side is the need for additional capital and the need for digitalization, which we have been working on to facilitate access to the mid and small-sized companies that have reacted to these circumstances in a favorable way. Therefore, we have been hit, though this has opened up an opportunity for other lines of business and other facilities that we were working on to move faster. Regulators have moved faster to digitalize the market, facilitating many different processes, reducing costs and risks, and facilitating work from home. I like to look at it as a glass half full in terms of learning from the process to bring new ideas and be prepared for circumstances like this in the future. We are bouncing back.
What role do you see BVL playing as a driver of this economic diversification?
BVL, like many other exchanges in the industry, has been integrating vertically with pre- and post-trade facilities to provide the possibility of facilitating these two aspects. This gave us the opportunity to enter all digital platforms. We have a regulated securities depository that is broadening its coverage of possibilities. We are not just focused on traditional securities but also getting into factoring on one side and are looking at digitalizing drafts and notes. This will allow not just financial institutions but also any institution to move around the financial world with digitalized instruments that have the operational risks reduced given the level of regulation that holds our platform. This allows us to get out of the traditional market and into a market that gives us capacity to access more mid-sized and small companies and small investors.
What strategies do you have in place aside from digitalization to overcome the obstacles of transparency and informality?
We seek to become an instrument of change, and part of the philosophy of the exchange is to properly regulate this market. We try to motivate companies to access this market and become more open and transparent. Allowing instruments that clearly reduce their cost is the best incentive toward greater transparency. By facilitating such instruments, companies see the direct benefit of becoming more formal and incorporating greater transparency into their operations in order to access these facilities. Such tangible elements will convince them it is worthwhile to become more transparent.
What are your priorities for 2021 and how optimistic are you about the overall macroeconomic outlook for Peru?
No matter how many issues are put on the table for us, I remain optimistic. We will bounce back faster than many believe. We have had our political issues, but they have all been solved within our legal framework. We have those issues at the macro level but there are opportunities in the country in mining and the fishing and agriculture industry. As an exchange, we look forward to being able to address these opportunities and growth with a larger market. We are considering market integration with Colombia and Chile as a way to offer the economy a larger potential for capital markets to expand and provide funding. We are working on digitalization in order to address a different segment of SMEs that grow as the large companies and large conglomerates grow with the growth of the economy. We are responsible and have a role to provide an alternative source for that purpose and contribute to lowering the costs of funding to all businesses and work more on trying to address the transparency issues.