Carlos Rodriguez-Pastor, Interbank
A decade ago, Darmouth MBA Carlos Rodriguez-Pastor had a double
vocation: by day, he was a US investment banker, working first at
Paine Webber and later on Citibank’s emerging markets trading desk;
in his spare time, he was an adviser on investments being made in
his native Peru by his father, the late Carlos Rodriguez-Pastor
Mendoza, a former Peruvian foreign minister then living and working
in the United States. In 1994, the Rodriguez-Pastor family made its
largest and most strategic investment back home, taking a majority
stake in the group that won the government’s privatization of Banco
Internacional (Interbank). The next year, the younger Carlos left
Wall Street for Lima following the senior Rodriguez-Pastor’s death,
and now serves as chairman and CEO of Interbank Group.

Are your family’s investments in Peru a good example of the
return of flight capital?

Actually, my family doesn’t have a history of being very wealthy.
My father and I worked for big companies in the US: he worked for
Wells Fargo and I worked at Citibank. So yes, it’s true, we brought
some money back. But to put things in perspective, the first
investment-the purchase in 1990 of Bank of America’s operation in
Peru-was a $1 million transaction done with a bunch of other
Peruvian investors.It was a small operation. Strategically, Bank of
America wanted to sell its operation in Peru. It was tiny, with $1
million in equity and $8 million in assets. And the bank’s focus
was very simple: it was foreign exchange, brokerage and trade
finance. At the time, a lot of people thought my father was
absolutely nuts, because you had an unknown guy named Fujimori who
was just elected and the country was going crazy with terrorism and
high inflation. But looking back it was a very smart and even
visionary decision that my father took.

What was it like for investors during that period?
Well, in 1990, Peru was just finishing a very tough period of bad
government under Alan Garcia. There was high inflation-I don’t know
how many thousand percent. There was Sendero Luminoso. Foreign debt
was trading at about four or five cents on the dollar. And we were
betting that Mario Vargas Llosa would become the next president. We
thought he would be a good guy to take the country forward. And the
big surprise was that this unknown guy named Fujimori won on a
platform that called for technology, hard work and education.
Nobody really knew what that meant and so everybody was concerned.
One is always afraid of the unknown, right?Well, he turns out to be
a fantastic president, doing all the right things. The first two
immediate things he did that helped to bring back the confidence in
the country, was the capture in 1992 of Sendero leader Abimael
Guzman and bringing inflation down. Inflation fell from 7,000% in
the first year of his administration to single digits today.

How did your family come to be a major shareholder in

Interbank was a separate purchase from Bank of America, which we
had renamed Inter-Andino; we bought Interbank when it was
privatized. There were actually four shareholders: one was my
family; another one was a Chilean group led by Alvaro Saieh and
Rene Albumor, the owners of CorpBanca; there was Nick Brady and
Darby Overseas Investments; and we also raised funds from
international investors.When we decided to buy Interbank, we knew
that local law here does not allow you to own more than 5% of more
than one bank. So we had a choice either to merge the two banks or
sell our share in Inter-Andino. We decided that the best thing to
do was to stay with Interbank, so we sold our Inter-Andino stake to
the other investors, who eventually sold it to Santander.But we
bought Interbank in June 1994, and it was another smart decision.
It had been a state-owned bank, run by the government for 24 years.
You can imagine what kind of shape it was in. But there was a lot
of potential-it was like a sleeping giant, waiting to wake up and
get in shape, and that’s what we’ve been doing.

But what convinced your father that it was a smart move-was it
a specific thing about Peru or just the trend in the region at the

One of the interesting things that was happening in some of the
countries in the region was that the rhetoric was changing…it had
become the language of privatization, foreign investment, reduction
of the role of the state and fiscal discipline. In Peru, if you
look at the numbers from 1990 to 1994, you can see that the
inflation trend was definitely on the right track-falling from
7,000% to 100% and then to 50% and down to 11%. GDP growth in 1994
was 13%, the highest in the world. The number of terrorist attacks
was cut in half. The number of strikes was down. Foreign investment
was way up and 1994 was the year that Telefonica of Spain purchased
the Peruvian phone company. So the trend was really positive.If you
look at the banking indicators, the banking penetration was really
very low. In terms of loans to GDP, we were at 6% in the late 1980s
and today we’re at 12%. That’s a good run, but way behind all of
our neighbors-other countries are in the 20% or 30% or 40% range.
So we had a combination of a growing economy plus a lot of catching
up to do on financial penetration. In a more stable and
disinflationary environment, we thought the consumer and the small
corporate business would become viable. So Interbank came to
auction and we thought it was a good opportunity to move into
consumer banking from being a niche corporate bank, which was
beginning to see a lot of competition from “suitcase” bankers
coming in from the US and Europe and offering deals straight to

What do you see as the two or three changes in Peru that have
been key in bringing investment back?

I think putting the house in order was important, because it built
local confidence. People really don’t want to put money in a
country that’s not stable, whether you live there or not. A lot of
the flight capital was understandable in these countries that were
going through a lot of turmoil. So restoring confidence was very
important.In Peru, the two things that were important, as I have
said, were controlling terrorism and bringing down inflation. After
that, I think that the growth of the economy in the last five or
six years has obviously been important.

What do you see as the pivotal changes region-wide?
One has been the resolution of the debt problem. It was a long
outstanding issue that made it very difficult for bankers to lend
more money to promote new investment. Recognizing that the banks
had to take a hit and the countries had to sacrifice a little bit
by privatizing and instituting market reforms started the ball
rolling.The second thing is that democracy started to take hold in
all our countries, and that was very important as well. Foreign
investment followed as a result. If you look around the region, I
guess in just about every country we all had our share of bad
leaders who would promise one thing and then deliver something
else. Maybe some countries need new, stronger leadership and more
courage to take some of these tough decisions. But now when you
look at Argentina, Menem has made a remarkable change; or there’s
Brazil, where Cardoso has done a good job. There’s Peru and there
are smaller countries that have made real progress, like Costa Rica
and Panama.

Who do you think will go down in history as the key figures in
the region’s transformation?

One would have to be Nicholas Brady, because the Brady Plan was
very important; it really presented a viable solution to the debt
crisis that in the end was adopted by most of these countries. Even
when a country didn’t have a Brady Plan, it was working towards one
and that showed they were working towards resolving and putting the
debt issue behind them.It also set the stage for this new openness
to foreign investment, which I think has been very important. For
many years, foreign investment was a bad word. But most of the
countries in Latin America have now realized that foreign
investment can be very good, that it helps create jobs and grow the