Integra Five LATAM Dispatch

June 17, 2022

"Google US$ 1,2B commitment to Latin America comes at crucial moment for the region. Building the digital infrastructure is esencial for the development of the tech industry and the rise of the companies of the future"

The key to boosting economic recovery in Latin America

The World Economic Forum recently suggested key actions that Latin American and Caribbean (LAC) countries ought to take to boost their economic recovery. LAC countries have been experiencing widening inequalities due to climate change, the pandemic and other shocks.  

Boosting digital transformation in transport is key as it provides citizens with essential, basic, and medical supplies. A digital advancement could lead to progress through markets, hobs, healthcare, and education. The Digital transformation would include the adoption of the Internet of Things, artificial intelligence, 5G, automation and electrification, putting the transport sector in a position to make huge gains. 

Greater visibility and streamlined and multi-stakeholder processes could lead to an unprecedented efficiency. In turn, there will be an improvement of the overall quality of services with better predictability, reliability and focus on users’ needs. These changes will reduce harmful emissions through the gains in operational efficiency and energy transformation. 

Source: Selected countries around 1,000 respondents per country surveyed in 2019 Source: Statista Global Consumer Survey

The current main barriers to digital transformation are resistance to change, lack of senior management prioritization, cost of technology and lack of financial resources and human talent. To move forward, making digital transformation a priority in sector planning, creating balance with risk mitigation, the use of a variety of instruments and fostering public sector digital transformation in transport. 

Google has a $1.2 billion plan for Latin America

Bloomberg reports that Alphabet’s Google has committed to invest $1.2 billion in Latin America over the next five years to support economic development and digital transformation in the region. Google has had an active presence since 2005.  

$300 million will be split into $50 million in cash contribution and $250 million in advertising credits. Pro Mujer will receive a good part of the resources to help women-led businesses in Guatemala, El Salvador and Honduras gain access to training and microcredit.  

The contribution is divided into four pillars: digital infrastructure, digital skills training, entrepreneurship, and inclusive and sustainable communities.  

Google has committed to creating an undersea cable next year to connect North and South America across the Atlantic Ocean, ensuring better internet for Google to offer its services in the region. It will be the longest in the world and will run from the United States to Argentina, stopping in Brazil and Uruguay. 

Investors show Latin American fintech startups the money

TechCrunch analyses the upward trend of investments in Latin American fintechs. 2021 was the year of a global funding boom, and Latin America received a lot of money in investments. As many people in the region are underbanked or unbanked, digital penetration has started taking off, with fintech startups being amongst the largest recipients of capital. 

LAVCA, the Association for Private Capital Investment in Latin America found that startups in the region overall raised $2.8 billion across 190 transactions during a 3-month period in Q1 2022 (ending March 31.) Fintechs are by far the largest recipients of venture funding in 2022 Q1, with 43% of dollars raised, or $1.2 billion having flowed into the category.  

Source: LAVCA, Data as of March 31, 2022

Carlos Ramos de la Vega, the director of venture capital of LAVCA said “We have continued to see the cross-pollination of business models within the sector: Payment platforms are increasingly incorporating BNPL alternatives, lending platforms have become full-service digital banks, challenger banks have expanded their product suite to include embedded credit products and working capital facilities.” 

AQ Podcast: Luis Alberto Moreno on Colombia’s Elections and Latin America’s Upside

Moreno, the former IDB chief discusses the effect of venture capital and the technological boom and how it can positively offset political uncertainty. Discussing his latest book on the AQ podcast, he talks about the history and political development of Colombia.  

Populism is on the rise internationally, and this he contributes to social media bringing out the worst and not allowing people to converge. Coupled with what he describes as the Colombia way of being fantastic at complaining, but inadequate at creating solutions makes for a difficult economy. 

However, his experience of inequality as a child has made him very alive to these issues and he sees it as a pivotal driver for change. The current investment in LatAm bodes well for the nation and region as a whole, calming the current political uncertainty.  

Brazil to halve hiking pace as cycle’s end nears: decision guide

Economists at Bloomberg analyse Brazil’s central bank as it is expected to slow the pace of its current aggressive monetary tightening campaign, as policy makers bet the highest interest rates in five years, which will soon start to cool inflation. 

All but two of 41 economists in a Bloomberg survey see the bank’s board lifting the benchmark Selic by a half percentage point to 13.25% on Wednesday, extending a cycle that has already added 10.75 percentage points to rates since March 2021. 

Brazil’s central bank, led by Roberto Campos Neto is battling persistent energy and food shocks which have kept rising in price by more than 10% a year since September. Core measures are high and price pressures are spreading to the services sector. 

Source: Brazil central bank, Brazilian Institute of Geography and Statistics

Investors will be looking to see whether Brazil offers a new increase in August, given inflation expectations remain above target. Persistent price pressures have already forced other Latin America central bankers to extend their tightening cycles, with Mexico even mulling a record rate increase next week. 

Reference

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