- 2 days ago
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00:00Daniel, thank you so much for joining us here.
00:12Pleasure.
00:14Jamie Dimon was in Africa a year ago, said he's, quote,
00:19quite optimistic about the future.
00:22We've heard that before, of course, but a lot has changed in the past year.
00:27What's the house view now on Africa?
00:30And opportunities.
00:31So we are very positive about Africa.
00:35So we have presence in South Saharan Africa in five places,
00:40including now a new office in Kenya and Ivory Coast.
00:46We are upgrading our license in Nigeria.
00:49We have President Johannesburg and Cape Town here.
00:51We cover around 350 clients, both sovereign enterprises
00:59and private sector.
01:01So I think that this may be the time.
01:06I like what we are seeing in this country and in other countries in the region.
01:11I think that the redirection of the supply change may be beneficial for this continent.
01:18So we will continue prudently, but invest.
01:24These are economies that South Africa is turning around, but also other economies are growing faster.
01:30So I think that there is a role for a company like us to gradually and prudently increase our presence and our coverage in the region.
01:39As you mentioned, I mean, Standard & Poor's just upgraded to South Africa.
01:44Do you see further upgrades coming?
01:46Well, it all will depend.
01:48And I think that this government have done very good things in terms of the reforms on the energy and power sector,
01:59the opening of the transportation system and reform on that, the water reform that is coming.
02:07So hopefully all these turn the dynamics of growth and move South Africa to a level of growth that is more in line with the potential of 3%, 4%, 5% rather than a 1%.
02:20And I know that tariffs have been a bit of a headwind.
02:25But overall, after 10 years of the economy really stagnate, really having very, even having negative productivity.
02:34So the country looks to have turned the corner and the potential is there.
02:42Some complaints in parts of the market that Africa still pays a prejudice premium when the countries issue sovereign bonds.
02:50I mean, I think Africa Finance Corp, the Development Bank, estimates that the continent spends as much as $75 billion a year on extra borrowing costs.
02:59Where do you stand in that debate?
03:03Well, so markets are markets.
03:06And markets are relatively efficient on pricing the risk.
03:10So if, unfortunately, when you look at the dynamics in the continent, that it may improve.
03:17But at the moment, so that is spread may be justified.
03:22So I think that over time, as the region improves, if the governance improves, the corruption hopefully goes down, there are structural reforms.
03:33All these things take place.
03:35So probably stress will tighten.
03:38And that will be in line with better growth and better future for the region.
03:44But at the moment, it is what it is.
03:47In terms of sectors, I mean, which sectors look interesting to you?
03:52Is it energy?
03:52Is it infrastructure?
03:53FinTech?
03:55Consumer?
03:55Where would you put your money?
03:57Well, all of the above.
03:58Clearly, energy is transforming and requires a lot of capital to continue to do so.
04:05Infrastructure, transport is another, ports, airports, all those areas need investment, and it will create opportunity.
04:18Clearly, this continent has roughly a billion and a half people growing very, very fast.
04:23So the consumer industry should be a thriving industry for the continent.
04:27And so all across, hopefully, all this potential gets gradually materialized, and the size of the business that we do goes more in line with the size of the continent.
04:40Because at the moment, it is relatively small, but growing.
04:44We put out a story the other day highlighting that Africa needs to create a billion jobs by the end of the century to fulfill its potential.
04:55What do governments have to do, and what are they not doing at the moment?
04:59What are companies doing or not doing to actually deliver on that?
05:03Well, it's about what we have talked about.
05:05So this country, 40-plus percent unemployment, big informal economy, 60% youth unemployment.
05:14So, therefore, that is kind of the base for a higher level of crimes and all that.
05:21So as you continue reforming these countries, so then the creation of jobs will be necessary, and they will happen.
05:29And the size of the informal economy will be smaller as labor laws and other reforms take place.
05:35So, likewise, you do all that, so everything improves.
05:42But they have to really do it in order for that to happen.
05:47You cannot continue with these numbers, 60s and 40s, in unemployment and things like that.
05:52So I think that the government is doing all the right things in this country, and hopefully that continues and gets deeper,
06:00so then you have a better situation for the people in the country.
06:06Relations between Washington and Africa aren't the best at the moment.
06:10You have accusations of genocide here.
06:13You have the Trump administration complaining about Nigeria not doing enough for Christians.
06:22Do you think this is sort of a short-term blip that's going to normalize at some point,
06:27or is there something fundamentally at risk in the current sort of frosty environment?
06:32I think that all the situation with tariffs and relation between the U.S. and many countries or regions around the world,
06:43at some point is going to stabilize.
06:45Tariffs will be set at a certain level.
06:48Trade agreements will be in place.
06:51So, therefore, it's likely to improve rather than deteriorate, in my view.
06:56You followed, obviously, and run businesses in emerging markets for a very long time.
07:00I'd like to zoom out a little bit and look beyond Africa.
07:04What's the state of emerging markets overall?
07:07Well, I think that the fundamentals are good.
07:12These countries are growing.
07:15Lower interest rates are helpful.
07:17The weaker dollar in some way or the other helps, too.
07:23Clearly, when you look at markets, emerging markets underperformed for many, many years.
07:30This year is probably the best performing, including this country.
07:34The equity market has gone up 40% and in dollar terms around 50% or more.
07:40So, I think that they are doing fine, including, hopefully, my country.
07:49You took my next question.
07:51You grew up in Argentina.
07:53Obviously, there was a little bit of a wobble in the markets the other day.
07:56But, generally, do you think Millet is on the right track?
08:00So, when he came to power, so the country was heading to a really meltdown.
08:07Hyperinflation, all these type of bad things.
08:10And, Argentina, from being probably the fifth or sixth biggest nation in the world after the Second World War,
08:22it's been deteriorating for the good part of 80 to 100 years.
08:28So, he, on the economic front, he did all the right things.
08:33So, cut the deficit, lower inflation, with a lot of pain from the population.
08:37But, hopefully, creating the base for growth.
08:41Now, he has done very well in the midterm election, but he doesn't have majority.
08:47So, the challenge from here is more than the economic front, it's the political front.
08:52And, can he create the right alliances to do the structural reforms that are needed for the country to grow faster,
09:01which is, essentially, labor reform, tax reform.
09:04So, if that happens, I think that there is a lot of potential, a lot of investment wanted to come to Argentina,
09:15particularly in mining and energy, agricultural sector, so agroindustry.
09:21So, I think that the potential is there.
09:24And, if this model is successful, then you could see the possibilities of the rest of the region moving in a different place,
09:32in a better place, clearly, he has aligned himself with the United States and, hopefully, the rest of the region does it, too.
09:40Because, when you think about the tension between China and the United States,
09:48so, it should be very beneficial for Latin America, for Mexico and the rest of the country.
09:54So, hopefully, that happens.
09:56When you look beyond 25 and into 2026, you seem to be quite optimistic.
10:02I mean, Jamie Dimon mentioned cockroaches the other day, which was sort of a quote that went viral.
10:09Do you see cockroaches around here?
10:11I think that the comment was taking a bit of context, in my view.
10:19So, it may be other cases of fraud.
10:22Maybe.
10:23We don't know.
10:24Possible.
10:26Clearly, in the auto financing sector, subprime financing, with used car prices after the COVID crisis being so high,
10:38if you are lending to low incomes, you're going to have some issues.
10:42And, in these cases, they are some related to fraud.
10:46What we are not seeing is a deterioration between what we were expecting in the credit cycle, in any of the portfolios.
10:54So, I think that credit remains solid, from credit cards in the U.S. all the way to big corporates.
11:01But, we will see how it plays and continues once the economy, I don't think that the economy will go into recession.
11:10It's likely to slow down, and the credit cycle will continue to normalize.
11:17But, I don't think that in the credit cycle, we see a deterioration beyond what we were expecting.
11:24If the economy slows down, where do you stand on the interest rate debate in America at the moment?
11:30Do you think the Fed is going to cut again in December or hold off?
11:33Yeah, I think that maybe some inflation is being quite resilient.
11:40The growth is slowing down.
11:42But, still, this quarter, I think that we should discount the numbers, whatever they can, because of the shutdown,
11:50that it will recover, whatever it is, it will recover in the next quarter, in the first quarter of next year.
11:57So, we do see some deceleration, we do see some reduction in consumption, but it's still for healthy levels.
12:05So, I think that the economy may grow less next year, but most likely it will avoid recession.
12:12Tariffs, they haven't had the full impact, but some will have a further impact next year.
12:19But, also, some will be compensated by the fiscal expansion.
12:24So, I am relatively positive on what we are seeing.
12:29Having said that, markets are pricing a very, very benign scenario, and quite a bit more.
12:36So, that I don't know.
12:39There may be issues or not, but the S&P at 6,700, so 23 times is quite healthy.
12:47You're not giving us a new S&P target.
12:51Well, whoever was giving target missed it all, so no.
12:57But, I think that from here, you could have saw that the upside is relatively limited.
13:02Obviously, no, onstage interviews these days can't include AI, so here's the AI question.
13:08Where do you stand on the continuum of hype, bubble, and it's going to solve everything?
13:17Well, the technology is real, and we are, even though we've been dealing with traditional AI for the last 10 years,
13:25we are now working in large language models, and we deploy that to almost every employee that we have.
13:33We are using different forms of this to improve productivity across operations, technology,
13:41detecting fraud, surveillance, credit decisioning, improving client experience.
13:51It's all over the place, but it's still at a very early stage, so large language models that are still not having the impact that they should have,
14:01and we're still very, very early in the agentic journey.
14:06Clearly, this will have an impact in the labor market.
14:11Some jobs will be created, and some jobs will be eliminated, but I think that one thing that ones want to keep an eye on
14:20is how much capacity is being created, and how all these companies, how much revenues they are going to get
14:29to compensate, to pay for that capacity is likely, I don't know the probabilities,
14:36but it's possible, there is probably a correction there, and that correction will also create a correction in the rest of the segments,
14:46in the S&P and in the industry, because you are probably, in order to justify these valuations,
14:54you are considering a level of productivity that it will happen, but it may not happen as fast as the market is pricing.
15:02Now, you stepped down from your day-to-day job in June, you have a farewell tour, similar to The Who,
15:11till the end of next year.
15:14What's, obviously, you're far too young to retire, so what's next for Daniel?
15:19I've been in the company for 43 years, and it was an amazing journey,
15:24in really working with Jamie, in transforming the company, and creating the success,
15:30be a contributor to the success of the company that we have.
15:37From here, clearly, I don't want any other operating jobs.
15:44I'm already in the board of Johnson & Johnson, which I think that is a fascinating industry,
15:48industry, and I want to continue learning, learn about other industries,
15:54being on top of innovation, understanding what could be the impact of AI
16:00in different sectors and in society.
16:02So, I want to take a bit of a slower pace,
16:07but continue to learn and explore other sectors and other avenues.
16:15And golf will play a part, as well.
16:17I would play a bit of golf, but not all that.
16:21Okay. Well, our clock here, it says we're out of time, so thank you so much.
16:30Thank you very much.
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