Why Latin America Loves a Good Scam

Three experts talk to the Latin Business Chronicle about why, in particular, Latin American businesses and investors are especially vulnerable to financial frauds such as the Madoff and Stanford cases.  This quote comes from Francisco Gonzalez of law firm Adorno & Yos.

GONZALEZ:  It is difficult to predict. However, Latin American investors operate under the confluence of three very dangerous elements. These are: i) Perceived need for confidentiality, ii) Just enough business and financial knowledge to be extremely dangerous to themselves and unable to understand the relationship between risk and reward, and iii) in the case of countries like Venezuela, exchange controls.  These three elements cause a perfect storm for those representing unknown financial institutions or those who offer unreasonably high returns. Using a variation of Gordon Gekko's famous expression...."Greed is Good", but it can also be very expensive.

How have the Stanford and Madoff schemes affected Latin American investor confidence in U.S. financial institutions?

GONZALEZ: Not at all. If anything, Madoff and Stanford make a better case for traditional banks than they have been able to make for themselves over the last 20 years. If Madoff and Stanford had been a traditional US financial institution, those losses would have been covered by FDIC insurance.