Z1, the Brazilian GenZers Fintech, raises $2.5 million

Z1, a Sao Paulo-based digital bank aimed at Latin American GenZers, has raised $2.5 million in a round led by U.S.-based Homebrew. A number of other investors also participated in the financing including Clocktower Ventures, Mantis – the VC firm owned by The Chainsmokers, Goodwater, Gaingels, Soma Capital and Rebel Fund. Notably, Mantis has also backed Step, a teen-focused fintech based in the U.S., and Goodwater has also invested in Greenlight, which also has a similar offering to Z1.

Z1 participated in Y Combinator’s Winter ‘21 batch earlier this year, and at the time got $125,000 in funding from the accelerator. Maya Capital led its $700,000 seed round in March of 2020.

Z1 is a digital bank app built for teenagers and young adults. The company was founded on the notion that by using its app and linked prepaid card, Brazilian and Latin American teenagers can become more financially independent. João Pedro Thompson and Thiago Achatz started the company in late 2019 and soon after, Mateus Craveiro and Sophie Secaf joined as co-founders. In its early days, Z1 is focused on Brazil but the startup has plans to expand into other countries in Latin America over time.

“Z1 is what we’re building to be the go-to bank of the next generation, and not just be a digital bank for teens,” Achatz told TechCrunch. “We want to grow with them and, one day, be the biggest bank in Brazil and LatAm.” Thompson agrees. “We’re acquiring users really early and creating brand loyalty with the intention of being their bank for life,” he said. “We will still meet their needs as they grow into adulthood.”

While Z1’s offering is not completely unlike that of Greenlight here in the U.S. the founders agree that its products have been adapted more to the Brazil-specific cultural and market situation.

For example, points out Thompson, most teenagers in Brazil use cash because they don’t have access to other financial services, whether they be traditional or digital.

“We offer an account where they can deposit money, cash out money via an instant payment system in Brazil or spend through a prepaid credit card,” he said. “Most sites don’t accept debit cards so this is a big step compared to what teens already have.”

Source: Atlantico LATAM Digital Transformation Report 2020

Source: ENIF, World Bank, Capital IQ, Financial Superintendence of Colombia, Verisk Financial Research, Reuters, Statista Bankscope.

Part of the company’s use for the capital is to make its product more robust so they can do things like save money for big purchases such as an iPhone and earn interest on their accounts.

Another big difference between Brazil and the U.S., the company believes, is that many parents in general in Latin America haven’t had a true financial education that they can pass down to their kids.

“We’re not top down like Greenlight,” Achatz said. “That approach doesn’t make sense in Latin America. Here, many are independent from an early age and already work whether it’s through a microbusiness, a side job or selling things on Instagram. They’re much more self-taught and the income they earn is often outside of their parents.”

Z1 has grown 30% per week and 200% per month since launch, spending “very little” on marketing and relying mostly on word-of-mouth. For example, the company is following the lead of its U.S. counterparts and turning to TikTok to spread the word about its offering.

“Step has around 200,000 followers on TikTok, and we have a little under half of that,” the company says. “We’re well-positioned in terms of branding.”

For lead investor Homebrew, the opportunity to educate and provide financial services to Gen Z in Latin America is even more exciting than the opportunity in the US., notes partner Satya Patel.

Over one third of LatAm Gen Z’ers have a “side hustle,” generating their own income independent from their parents, he said.

“While millennials grew up during an economic boom, Gen Z grew up during recessions – 3 in Brazil over the last decade – and wants to become financially independent as soon as possible. They’re becoming economically educated and active much earlier than previous generations,” Patel added.

He also believes the desire to transact online, for gaming and entertainment in particular, creates a groundswell of GenZ demand in Brazil for credit card and digital payments products. (Crunchbase)

Storing Carbon Holds Growing Appeal for Brazil’s Farmers

Growers see environmental and financial benefits in selling carbon offsets; environmentalists say stopping deforestation is the priority. At the fringes of Brazil’s vast farming heartland, technology startup Agrorobótica has built a device the size of an office printer to measure carbon in the soil and help farmers get certified for a budding carbon market.

Government officials, business executives and climate experts say Brazil, an agricultural powerhouse and home to most of the Amazon rainforest, could profit from policies that encourage sustainable farming practices and other methods of draining carbon dioxide from the atmosphere. Such initiatives generate carbon credits that farmers can sell to companies under pressure to cancel out their own emissions.

Currently, Brazil has no mandatory emission caps, but food producers already sell carbon credits in so-called voluntary markets to corporations seeking to offset emissions. Carbon-market advocates say a more formal environment could deliver a boost to Brazil’s economy.

“The potential in Brazil to capture carbon is way higher than in many other countries,” largely due to the vast biodiversity found in rainforests, said Manuel Piñuela, co-founder and CEO of Cultivo, a California-based firm that connects potential buyers of so-called carbon offsets with climate-friendly projects to fund. He said Cultivo has identified 100,000 hectares of land in Brazil that could be added to its portfolio of projects in the next few months. Brazil’s share of the world’s carbon sequestration potential is 15%, a level matched only by Indonesia’s and well above that of the next highest, 5%, found in the Democratic Republic of Congo, according to a report published in May by McKinsey & Co. and the World Economic Forum. (WSJ)

Source: State and Trends of Carbon Pricing 2020

Sergio Diaz Granados, of Colombia, elected to head CAF bank

Colombia’s Sergio Diaz Granados will lead one of Latin America’s top development banks after a heated selection process that laid bare the region’s deep ideological divide.

Diaz Granados defeated Argentina’s Christian Asinelli to become the next head of CAF Development Bank of Latin Americaaccording to a statement on the institution’s website Monday. The election pitted the region’s orthodox governments, like Brazil and Colombia, versus populist leadership in Argentina and Mexico.

Currently Colombia’s executive director at the Washington-based Inter-American Development Bank, Diaz Granados will serve a five-year term at CAF with the chance to be renominated once more. Asinelli will act as vice president of programming, according to an official at the Argentine government, where he works as deputy secretary for international financial relations.

The vote, which took place in Mexico City, came after CAF’s former president, Luis Carranza of Peru, resigned in March a year before his mandate formally ends. In his resignation letter, Carranza cited political pressures, explicitly referencing Argentine authorities for asking him to appoint a vice president who he deemed unqualified for the CAF.

Asinelli’s failure to reach the CAF’s top job is another diplomatic defeat for Argentine President Alberto Fernandez, who last year unsuccessfully tried to have his adviser Gustavo Beliz become the head of IDB.

CAF provides over $14 billion in annual financing for infrastructure and other projects in the region. Based in Caracas, Venezuela, it’s made up of 19 member countries in Latin America and the Caribbean, Spain and Portugal. (Bloomberg)

Source: P. Fleiss, “Multilateral development banks in Latin America: recent trends, the response to the pandemic, and the forthcoming role”, Studies and Perspectives series- ECLAC Office in Washington, D.C., Compiled by authors based on International Debt Statistics. Note: Excluding High-Income Countries.

New Royalties on Chilean Mining Companies

The Chilean Lower House of Parliament approved a bill to change mining companies’ current tax structure to a revenue based progressive marginal rate over copper prices, according to Fitch Ratings. The bill now in the Upper House would dramatically increase current taxes for the mining activity in the country.

Fitch estimates that total taxes for a miner could exceed 70% of pre-tax income when copper prices reach values close to current levels at $10 per kilo. In case the bill is approved in the current form, Chile will become one of the countries with the heaviest tax burden in the world imposing an additional levy to an industry which is experiencing several challenges.

Fitch estimates the country’s copper industry competitiveness would be severely damaged, cash costs will rise, investments would flow to other mining districts, and current expansion plans will be reassessed impacting an industry which is the current growth engine for Chile.

Most affected are the smaller companies that benefit from lower economies of scale, some of them long-term viability could be threatened.

Larger mining companies that represent over 80% of the country’s copper exports would see their operating cash flows significantly affected, but are expected to take measures to adjust to this new scenario. Antofagasta plc for instance, in a price scenario like the actual will suffer a relevant impact on its cashflow but its strong credit profiles would remain unaffected due to its low debt levels compared with its EBITDA generation and robust cash profile, both reflected in historically low net leverage ratios. (Fitch Ratings)

Note: Source: Data compiled by Goldman Sachs from company data, Chile Mining Council, consejominero.cl

Source: Goldman Sachs Global investment Research, Data excludes state owned copper miner Codelco.

Ecuador president issues decree to open Petroecuador to private investors

  • President Lasso’s new hydrocarbons policy to seek private investment
  • Decree eyes bid rounds for Petroecuador refineries, pipelines, oilfields
  • Lasso aims to double Ecuador’s crude production

Ecuadorian President Guillermo Lasso issued a decree July 7 aimed at opening up state oil company Petroecuador’s assets to private investment, reversing decades of statist policies in the country.

The decree, which involves an “immediate plan of action” over the next 100 days, establishes a new hydrocarbons policy that seeks to boost the country’s crude oil production, Lasso said.

“We must increase and improve our income, and one of the most important sectors is that of hydrocarbons,” Lasso said at a broadcast signing ceremony at the Presidential Palace in Quito.

The decree includes a legal framework to make exploration and production contracts more equitable for local and foreign investors, clearing the way for the renegotiation of current contracts to encourage more private investment in exploration. A reform of the existing Hydrocarbons Law will be proposed, according to the decree.

It also facilitates the possibility of calling international bid rounds for private concessions to operate Petroecuador’s oilfields, pipelines and the 110,000 b/d Esmeraldas, 45,000 b/d La Libertad and 20,000 b/d Shushufindi refineries. The state company has 60 days to produce a report on the state of its assets.

The government, which also plans to sell off all of Petroecuador’s 60 gasoline stations, will also seek to make crude transport and trading more efficient and transparent, in addition to creating an oil sustainability fund to finance social programs in oil-producing areas.

Lasso, a 65-year-old former banker who was sworn in May 24, has pledged to double the country’s crude oil production to 1 million b/d in the medium term. He later met with a US delegation including five senators to discuss a potential free-trade agreement.

Petroecuador, which accounts for 80% of the country’s crude output, was producing 388,064 b/d through July 4 and plans a 72 oilwell drilling program at its ITT oilfields. (S&P Global)

 

Source: Statista

Note: total petroleum production including crude oil, natural gas plant liquids (NGPL), other liquids*, and refinery processing

* Includes biodiesel, ethanol, liquids produced from coal, gas, and oil shale, Orimulsion, and other hydrocarbons.gain

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