Integra Five February 18, 2021 -

The New Frontiers of Electronic Payments in Latin America

Latin America’s e-payments and digital wallet segments are set to see another intense year in Latin America’s e-payments and digital wallets segment is set to see another intense year in products, investments and consolidations among the different players, including payment processors, customer experience companies, developers and API integrators.

E-commerce growth and the digitization of large portions of the populations through smartphones and the historic difficulties related to formal credit and banking access are among the main vectors for growth.

Zendesk, an American customer experience and customer channel integration solutions for enterprises, sees the acceleration of e-commerce in the region driving the use of digital channels for client-enterprise relationships and thus boosting its business regionally even in a more challenging macroeconomic context. 2022 is expected to have strong growth and acceleration in regional investments.

The growth in this sector has attracted national and international private equity investments. According to data from the Latin America Venture Capital Association (LAVCA), private capital investment in Latin America reached US$10.3bn in 402 deals during the first half of 2021, with the financial services sector, led by fintechs, getting 42% of that pie. [1]

Crypto VC Investments in Latam Grew Almost Tenfold in 2021 to $653M

According to a report published by the Association for Private Capital Investment in Latin America (LAVCA) Venture capital investments in crypto and blockchain firms in Latin America reached $653 million in 2021, almost 10 times more than was invested in 2020. Investments were concentrated in consumer facing asset exchanges and retail trading platforms, which together captured $607 million.

Crypto investment in Latin America continued to boom. According to CB Insights’ “2021 State of Blockchain” report VC funding for blockchain startups reached $25.2 billion last year, up 713% from $3.1 billion in 2020.

Mercado Bitcoin, Brazil’s leading crypto exchange raised a total of $290 million across three rounds and reached a $2.2 billion valuation. Additionally, Bitso, a Mexican crypto exchange with operations in Argentina and Colombia, raised $250 million in May 2021 and became the first crypto unicorn in Latin America. [2]

Latin America Sovereigns Dashboard: Fiscal Recoveries Are Stronger Than Expected

Fiscal recoveries among Latin American sovereigns in 2021 were much stronger than previously expected. The deficits of many sovereigns narrowed to close to pre-pandemics levels, and were even lower for a few (Costa Rica, Brazil, Ecuador, Guatemala).

Tax collection that grew in excess real GDP and inflation (except in Panama and Bolivia) was the key driver of the strong fiscal outturns. This mostly occurred without tax increases, reflecting other structural and cyclical factors that are difficult to parse.

Commodity Boom: Mining-related revenues in Chile and Peru rose around 2pp of GDP relative to 2019. Higher oil prices drove a big fiscal improvement in Ecuador, but not in Mexico where the windfall is mainly being used to support struggling Pemex rather than transferred to fiscal coffers. [3]

Latin American Unicorns Are Helping Drive a Regional Hiring Boom

The largest startups are helping to drive a spike in new higher skilled job as record investment allows local companies to boost recruitment and look for talent beyond their own borders. A report in Deel Inc. found the growth rate of hiring across Latin America for positions like software engineer and account executive has increased by 286% in the second half of 2021, more than in any other region in the world. Most of these hires are in Argentina, Brazil and Mexico, but the competitive wages are making companies take a look at Peru, Colombia and the Dominican Republic too.

Latin American startups received a record $15 billion in funding last year, which is more than triple the previous record.

According to Pepe Villatoro, the regional head of expansion at Deel Inc., the hiring boom is due to the growth of regional unicorns. In interview he said “it’s exploding”. “The war for talent is not only with U.S. companies hiring in Latin America, but also Latin American companies more and more in Brazil and Mexico, and in Colombia and Argentina as well.”

Foreign companies hiring in Latin America has increased by 156%, more than anywhere else in the world. This was pushed by the move to remote work. Villatoro said that the thousands of engineers and developers graduating in Latin America now have access to opportunities with the top companies in the world. [4]

As IPOs and SPACs Freeze, Secondary Deals are Seen Heating Up

Secondary deals, where investors buy second hand equity stakes from early backers, founders and employees have gained prominence the last few years as companies stay private for longer. According to PitchBook data the global unicorn count has grown from 200 in 2016, to over 1,000 this month.

Last year venture capitalists and non-traditional players often paid substantial premiums to companies most recent valuations to get access to coveted fast-growing late-stage startups by any means available.

Andrea Walne, a general partner at secondaries-focused investment firm Manhattan Venture Partners, said that high-profile hedge funds and other well-known crossover investors are especially aggressive with buying discounted shares. In some cases, she said, these investors are putting in orders of around $50 million for shares at prices well below the company’s previous valuation.

However, in this climate, trading volumes have cooled off which is an indication that some investors are waiting to sell stakes as they come to grips with the new reality emerging in late-stage company prices. [5]