Chile's Investment Momentum

Chile is becoming a favourite for emerging market investors as the central bank’s pivot added to the positive developments which have lifted the nation’s assets. The peso has been the world’s best performing currency this year and has had a further boost from the larger than expected rate hike which pushed swap rates higher, and improved returns for carry traders. Simultaneously, the sale of $4 billion in sustainable sovereign dollar bonds was well received by markets and stocks closed at their highest in about a week.

After the election of leftist Gabriel Boric a selloff was triggered last year, making things look better for Chile. Boric has adopted a moderate stance, picking a well-known central banker to lead the finance ministry, and opposing further pension withdrawals.

This positive change comes after a period of uncertainty in Chilean markets, due to fears that Boric would expand the debt burden as his leftist coalition pushed through ambitious campaign pledges to improve public services and reduce inequality.

Wells Fargo strategist Brendan McKenna stated that “if the political risk continues to ease, the peso should be one of the emerging market currencies that outperforms.” [1]

Source: Bloomberg

China Inks $8 Billion Nuclear Power Plant Deal in Argentina

State owned China National Nuclear Corp signed a contract with Argentina to build the $8 billion Atucha III nuclear power plant using China’s Hualong One Technology, reviving a deal that had been stalled for years.

Argentina’s government said that the project “involves an investment of over $8 billion” for engineering, construction, acquisition, commissioning and delivery of a HPR-1000 type reactor.

“Atucha III will have a gross power of 1,200 MW and an initial useful life of 60 years, and will allow the expansion of national nuclear capacities,”

Details of financing of the nuclear power plant deal were not available. The reactor will be installed in the town of Lima in the province of Buenos Aires. [2]

4 Ways Venture Capital Can Join the ESG Revolution

Venture capital has been late to the adoption of ESG principles. The top 50 largest venture capital funds, only five were found to have mentioned ESG or a commitment to sustainability.

Johannes Lenhard and Susan Winterberg make four suggestions to improve these practices:

Venture capital funds can begin their ESG journeys by adopting ESG practices in their own operations. Promoting diversity, equity and inclusion amongst partners and hiring pipeline. From there, funds can focus on ESG considerations in their investment processes.

Limited Partners must advance responsible approaches to venture capital funds in two ways: LPs can include ESG considerations when deciding how to allocate capital among funds and they can help advance a responsible and ESG agenda when it comes to their own portfolio management.

Market Research, Data Providers, Rating Agencies: all vital information sources to VC’s on trends and growth forecasts for new technologies. Crunchbase and Dealroom have started to publish DEI data recently, but ESG data is absent. This information needs to be widely available.

Regulators: The EU demands that investors report a investors have to report on a comprehensive Sustainable Finance Disclosure Regulation (SFDR ) framework introduced in March 2021 (requiring sustainability-focused VCs to report on a large number of ESG indicators, including greenhouse gas emissions, the gender pay gap, board diversity, whistle-blower protection and human rights performance). [3]

The Expansion of Latin America’s Largest Fiber Backbones

Several Latin American countries are in the process of expanding their fiber optic structures, which are at the foundation of telecom networks and the most important infrastructure for the transportation of data. These systems are known as dorsal/trunk networks and they run through thousands of kilometres, connecting telecom operators’ central servers to internet points and access networks. Brazil, Argentina, Mexico and Chile have the most impressive projects of this kind at present.

Brazil’s OI runs along 400,000km and is thought to be the largest in Latin America. It is operated by V.tal; which expects to reach 32 million homes by 2025, and 30 billion reais in investments.

In Argentina, Arsat, is the state-run federal fiber which spans 34,500km. The network reaches over 1,000 localities, in 24 provinces. They plan to deploy an additional 4,500kmm and reach 280 new localities by 2023. It is estimated by the government to requires 7.65 billion pesos in investments. [4]

Nubank Sees Brazil Downturn as a Chance to Grow Faster

David Velez, the founder and CEO of digital bank Nubank (NU.N) said that Brazil’s economic downturn may represent an opportunity for Latin America’s newest listed lender to gain market share aggressively despite the riskier environment.

Nubank debuted on the New York Stock Exchange less than two months ago as Latin America’s most valuable institution, worth $52 billion. However, shares have taken a hit since then, but its 48 million clients make it one of the world’s largest digital banks which is recently expanded in Mexico is well positioned for growth.

Morgan Stanley’s analysts estimated that expanding Nubank’s credit portfolio is key to reach profitability. Velez added that Nubank’s growth has prevailed through two recessions, a presidential impeachment and the Covid-2019 pandemic.

Whilst strong with a sole digital presence, Nubank is open to partnering with brick-and-mortar banks to offer mortgages. [5]


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