Latin America Experienced Explosive Growth in Web 3 Investment in 2021

The 2022 LAVCA Trends in Tech report that VC investment in blockchain and crypto reached $653 million in 2021, up from $68 million in 2020. This runs parallel to rising consumer interests for digital assets and Decentralised Finance (DeFi).

Capital is concentrated in consumer facing asset exchanges and retail trading platforms. Mercado Bitcoin raised $290m across three rounds; Bitso raised $250m; Ripio $50 and Lemon Cash $17.3m.

The fintech sector in Latin America was the leading tech investor for VC investment registering $6.1 billion invested across 258 transactions, growing almost four times compared to 2020. LAVCA reported that 2020 saw $4.14 billion in VC investments in the midst of the coronavirus pandemic. In 2021 this figure was found to have reached $15.7 billion. In the process, 16 tech-powered enterprises reached unicorn valuation.

Latin America, like Africa is home to many of the world’s emerging economies with countries such as Brazil, Mexico, El Salvador and Argentina all being leading players in the emerging crypto landscape. [1]


Source: LAVCA. Data as of December 31, 2021.

IPCC Report: Effects of Climate Crisis Will Deepen in Latin America

The IPCC scientific report warns of the irreversible impact of climate change over the coming decades and states that Latin America will be highly exposed due to the region’s vulnerability exacerbated by social and economic factors such as high levels of poverty and inequality.

The report explains that the world is facing climate risk and impact over the next decades, many of them irreversible. Climate change will continue to increase the incidence of heat related diseases, impact food security and threaten water access. If global warming exceeds 1.5c pre-industrial levels, the consequences will be even more dire.

Latin America is particularly at risk in its role as a food producer. Between 2015 and 2019, crops growth duration for soy shortened by 4.7% in Central America, 3.1% in northwest South America and 2.7% in southeast South America. Meanwhile, growth duration for maize at the same period declined 5% in Central America, 5.6% in northwest South America and 5.2% in southwest South America.

Latin America will continue to be affected by extreme weather events. The list of threats include rising temperatures and sea levels, coastal erosion and increasing frequency of droughts, associated with a decline in water supply and a negative impact on livelihood. At particular risk is the Amazon forest, as its capacity as a carbon sink may be reduced due to increased drought and fire. [2]

Oil at Over $100 Puts Spotlight on Latin American Supplies

$100 oil has returned and the repercussions from Russia’s invasion of Ukraine have traders and investors wondering where the world can turn for more supplies. For those looking to Latin America, look elsewhere. Latin America is a historic commodities exporter and in previous commodity price cycles it has responded with additional barrels. However, this time Latin America is unprepared to pump more despite demand having returned post Covid-19, low inventories and geopolitical upheaval in Europe due to the Russia and Ukraine war.

The oil market is tight after years of under-investment in production, and this is why Latin America won’t be exporting crude any time soon. In Brazil, production growth has stabilized and it is unlikely to start rebounding until new deep water production vessels come online in 2023.

Source: International Energy Agency Note: “Others” include Guyana, Trinidad and other locations.

Todd Martinex, a senior director at Fitch Ratings was quoted saying that “most Latin American producers are at capacity at the moment. For now, the boom comes from the price.” Additional supplies will have to come from the US shale producers and the Organization of Petroleum Exporting Countries in a market where demand has returned to pre-Covid levels, but production has not. According to Rystad Energy, there is a 1.5 million barrel a day supply deficit globally that could rise to 2 million barrels a day by the summer in the Northern Hemisphere. [3]

Chile’s Appetite for Going Green to Be Revealed in New Constitution Vote

Chile’s new constitution includes a proposal to grant inalienable rights to flora and fauna. The plan is controversial, and if approved by two thirds in a vote on the the floor of the Constitutional Convention it will be included in the draft of the new charter, and the Chilean model could swing sharply toward ecological preservation over economic development.

Whilst it would be a step towards the global trend of heightened scrutiny of environmental, social and governance issues, a shift too far in a natural resources dependent country would threaten investments, jobs and global commodity markets. [4]

DR Central Bank Chief Sees Foreign Flows Boosting Rebound

According to the Dominican Republic’s central bank (the Caribbean’s largest economy) it is on track to see strong growth for a second year straight as foreign investment and surging tourism fuel the post-pandemic recovery. Hector Valdez, the bank’s governor of 25 years, suggests that the economy will grow between 5.5% and 6% this year, bolstered by emergency stimulus provided during the worst of the pandemic.

“The principle asset of the Dominican economy is its resilience, which is supported by a diversified productive sector and solid fundamentals.” According to the bank’s figures the nation’s economy expanded 12.3% last year and output is now higher than it was before the pandemic.

Additionally, the country’s aggressive vaccination campaign also allowed it to keep its doors open to tourism while many of its Caribbean competitors were shut. The country has fully vaccinated about 56% of the population while 20% have received third shots, according to Bloomberg’s Vaccine Tracker.

Source: IMF

However, a threat to the central bank is the recent spike in consumer prices. The country’s relatively open, trade dependent economy has been hit by the global inflation shock. Shipping costs from China surged to $20,000 per container, which is 10 times more than the pre-pandemic level. In response, the bank raised its benchmark interest two percentage points since November, and has taken steps to withdraw excess liquidity to “avoid possible overheating”, Valdez said. [5]

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