Belvo raises Latin America’s largest ever Series A

This week Belvo announced a $43 million funding round. The fintech will use its new capital to scale the product offering, continue expanding its geographic footprint and double its current headcount of seventy.

Belvo aims to work with leading fintechs in Latin America, spanning verticals like the neobanks, credit providers and personal finance products Latin Americans use every day.

The startup’s goal with its developer-first API platform that can be used to access and interpret end-user financial data is to build better, more efficient and more inclusive financial products for Latin Americans. Developers of popular neobank apps, credit providers and personal finance tools use Belvo’s API to connect bank accounts to their apps to unlock the power of open banking.

As TechCrunch Senior Editor Alex Wilhelm explained, Belvo might be comparable to U.S.-based Plaid, but more attuned to the Latin American market so it can take in more diverse data sets to better meet the needs of the various markets it serves.

So while Belvo’s goals are “similar to the overarching goals of Plaid,” co-founder and co-CEO Pablo Viguera told TechCrunch that Belvo is not merely building a banking API business hoping to connect apps to financial accounts. Instead, Belvo wants to build a finance API, which takes in more information than is normally collected by such systems. Latin America is massively underbanked and unbanked so the more data from more sources, the better.

“In essence, we’re pushing for similar outcomes [as Plaid] in terms of when you think about open banking or open finance,” Viguera said. “We’re working to democratize access to financial data and empower end users to port and share that data with whomever they want.”

Source: LAVCA Industry Data

Source: KoreFusion, 2020 LATAM Fintech Report, summer 2020

The company operates under the premise that just because a significant number of the region’s population is underbanked doesn’t mean that they aren’t financially active. Belvo’s goal is to link all sorts of accounts. For example, Viguera told TechCrunch that some gig economy companies in Latin America are issuing their own cards that allow workers to cash out at small local shops. In time, all those transactions are data that could be linked up using Belvo, casting a far wider net than what we’re used to domestically. (TechCrunch)

IDB Invest sells blue bonds for LatAm maritime projects

With sustainable debt sales soaring in Latin America, IDB Invest is testing the waters for the sale of what would be the region’s first blue bond, with proceeds to be used to finance maritime projects such as sustainable fisheries across the region and tourism developments in the Caribbean.

Note: 2021 data through end of April; includes sovereign, corporate and multilateral borrowers. Source: BloombergNEF

“It will provide a start to create a market that can finance the blue economy,” said Gema Sacristan, chief investment officer at IDB Invest, the private sector arm of the Inter-American Development Bank Group.

Globally, only a handful of such bonds have been sold, starting with the Seychelles Government in 2018. Sacristan said that while previous blue issuance has been small — the Seychelles sale was for just $15 million — IDB Invest aims to raise $100 million or more.

IDB Invest is still identifying how it intends to use the bond proceeds. Seaports that are looking to green their environmental impact could be candidates, as well as fisheries and tourism-related projects in the Caribbean, Sacristan said

The sale would be another test of investor demand for the thriving market for debt that finances environmental, social and governance projects, so-called ESG debt. Although Latin America is on pace to top last year’s issuance record, it still accounts for just around 2% of global sales.

IDB Invest, which has helped structure green, social and sustainable bonds by borrowers in nine countries in the region, is aiming to spur the sector. This year, it sold debt to finance lending that promotes gender equity as well as a $1 billion sustainable bond for green and social projects.

It plans to return to the market as soon as this month with its own green bond — with proceeds financing environmentally beneficial projects — followed by the blue bond, which will likely come in the second half of the year.

The bank last month released an executive guide that provides a road map for companies considering issuing ESG debt.

“We really see this trend gaining momentum globally and increasingly in the region,” Sacristan said. “The main goal is to encourage Latin American issuers to use capital markets to finance sustainability-related projects.” (Bloomberg)

Brazil GDP hits pre-pandemic level

Brazil’s economy grew by 1.2% in the first quarter, data showed on Tuesday, faster than economists had expected, as rebounding services and investments took Latin America’s largest economy back to it’s size at the end of 2019, before the pandemic hit.

It was the third consecutive quarter of growth. While the rebound has slowed, underlying figures suggest strong foundations for a continued recovery, prompting upward revisions to full-year forecasts and a surge in Brazil’s currency.

Source: IBGE, The Brazilian Report

“This makes the outlook for the coming quarters very positive,” said Jason Vieira, chief economist at Infinity Asset Management in Sao Paulo, calling the data “a really good set of numbers, especially fixed business investment.”

Brazil’s real rose to 5.15 per dollar , on track to close at its strongest this year. It is up 0.5% since Dec. 31, a sharp rebound since being down more than 10% year-to-date against the dollar in March.

Economy Minister Paulo Guedes said growth this year will likely be “very strong”, and economists at Citi and Goldman Sachs jacked up their 2021 gross domestic product growth forecasts to 5.1% and 5.5%, respectively.

“We expect the economy to recover visibly in coming quarters in tandem with further progress on the Covid vaccination front, gradual reopening of the economy, renewed fiscal stimulus, (and) recovering consumer and business confidence,” Alberto Ramos at Goldman Sachs said.

Brazil’s economic recovery has also helped accelerate inflation, prompting aggressive interest rate hikes. The central bank has raised its benchmark Selic rate by 75 basis points at each of its last two policy meetings, to 3.50%, and has indicated it will do so again next month.

Brazil’s first-quarter growth was driven by services, industry and fixed business investment, official statistics agency IBGE figures showed. Agriculture grew by 5.7% in the quarter, its fastest pace in four years.

Government spending fell and manufacturing contracted. Household consumption fell less than expected, according to Vieira at Infinity, and is expected to stay surprisingly strong for the rest of the year.

The 1.2% growth rate in the January-March period from the previous three months was more than the median forecast in a Reuters poll of economists for 1.0% growth.

The range of forecasts from 27 economists was wide, indicating difficulty in assessing the impact of the end of emergency government aid payments to the poor on Dec. 31 and the onset of the COVID-19 pandemic’s second wave.

Industry expanded by 0.7%, the dominant services sector grew 0.4% and fixed business investment rose 4.6% in the quarter, IBGE said.

Household consumption slipped 0.1% and government spending fell 0.8%, one of the biggest quarterly declines in years. Within industry output, the manufacturing sector shrank by 0.5%.

Compared with the same period a year earlier, GDP grew by 1.0%, IBGE figures showed, also more than the 0.8% rise forecast in a Reuters poll.

IBGE figures show economic activity is back to its pre-pandemic level at the end of 2019 but still 3.1% below its peak in 2014.

Economists warned, however, that tight fiscal policy, rising interest rates and continued uncertainty surrounding the pandemic and government’s economic reform agenda were risks that point to much more subdued growth next year. (Reuters)

This weekend Peru and Mexico Vote

Peru will choose its fourth president in under a year on June 6. This second-round run-off election pits Pedro Castillo, a rural primary school teacher turned hard-left populist, against Keiko Fujimori, the scion of an authoritarian president who ruled in the 1990s. Many center-right voters and investors are nervous at the prospect of a win by Castillo, whose political party Free Peru is led by a Marxist advocating widespread nationalization, higher taxes, a new “people’s constitution” and import substitution policies in the world’s number two copper producer.

Both Mr. Castillo and his right-wing rival Keiko Fujimori, who are statistically tied in the polls, emerged from an 18-candidate first round of voting with less than 20% each. Should Mr. Castillo prevail, he may struggle to govern since his party doesn’t have a majority in Congress. Observers worry about the commitment of both to democracy.

On the same day, Mexicans will decide how much control over Congress to give their leftist president, Andrés Manuel López Obrador. Since taking office in 2018, he has expanded state control of oil, gas and electricity while challenging the independence of the judiciary. (FT, Wall Street Journal, Reuters)

What could a Castillo win mean for copper?

In Peru copper mining firms’ coveted tax stability agreements that freeze tariffs are in question as socialist candidate Castillo would likely follow Chile’s recent move to increase royalties from the mining industry. Chile’s lower house approved a progressive royalty on copper sales so onerous that it is described by miners as “akin to expropriation.” Constitutional changes afoot could also mean tighter rules on water, glacier protection and mineral and community rights.

Peru is the world’s No. 2 producer of copper and Castillo has accused mining firms of “plundering” Peru’s wealth. He has spoken about more than doubling the state’s share of mining profits to 70%, and using the funds for boosting healthcare and education and reducing income inequality.

A Reuters analysis of government data shows this would hit Chinese mining firms hardest if Castillo were to win the election and follow through with his plan.

Chinese mining firms have become a key player in Peru’s mining industry. The Asian country is by far the largest buyer of Peruvian copper, used for everything from construction to the development of electric cars.

Peru has signed as many as 25 tax stability agreements since the 1990s, the data from the Mines and Energy Ministry shared with Reuters shows. The deals are meant to buffer investors from political or economic upheaval and experts say they set the stage for investment in some of the country’s largest mines.

Castillo’s tax plan could further unnerve markets and ratchet up uncertainty in the world’s top copper producing region. In neighboring Chile, the world’s No. 1 copper producer, the lower house of congress has already approved a plan to hike royalties on mining. (Reuters, Bloomberg, FT)

Cash cost position. Source: CRU Group

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