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August 16, 2019

China's Huawei to invest $800 million in new Brazil factory, SoftBank’s Latin American Billion-Dollar Deal Binge, Colombia fines Uber more than $629,000, and more…

🇧🇷 China's Huawei to invest $800 million for new factory in Brazil

Huawei Technologies Co Ltd plans to build an $800 million plant in São Paulo over the next three years, as the company ramps up its Latin American presence.

São Paulo Governor João Doria said the Chinese tech giant is gearing up to build the plant to meet expected demand following Brazil’s first 5G spectrum auction, scheduled for March 2020.

Huawei, the third-largest smartphone manufacturer in the world, imports handsets from China for the Brazilian market and has considered local production.

According to an email sent from Huawei to Reuters, this new factory will likely produce smartphones. “Depending on the performance of the smartphone operation in the local market, Huawei will consider building a plant in São Paulo in the near future,” the email added.

Huawei, which has been operating in Brazil for 21 years, already has one factory producing equipment for telecoms infrastructure in São Paulo state, with 2,000 employees. The exact location of the new plant- which will reportedly employ 1,000 people- will be decided on in the upcoming months.

According to the Sao Paulo government, production would be for both domestic and foreign markets.

U.S. President Donald Trump has urged governments worldwide to snub Huawei, insisting the company’s equipment could be vulnerable to Chinese eavesdropping. Thus far, very few have heeded the warnings. However, limitations in the U.S. market have pressured Huawei to strengthen its presence elsewhere.

💸 SoftBank Upends Latin American Startups with Billion-Dollar Deal Binge

SoftBank Group Corp.’s Latin America rally, a multibillion-dollar deal spree that produced a wave of unicorns and upended the region’s startup landscape, is just getting started.

The technology giant still has roughly $4 billion left of the $5 billion fund it launched in March for new technology companies in the region. According to Andre Maciel, a Managing Partner at SoftBank Group International, the firm has its sights set on roughly 300 targets; with 200 of them being from in Brazil.

Maciel, SoftBank’s head of Brazil and Structured Transactions, said in an interview at the firm’s Sao Paulo offices, stated,

“We already feel that the opportunity in the region is bigger than what we originally thought. There’s a lot outside of Brazil we still haven’t got around to even looking at” (Bloomberg).

For the next round, Maciel said they’re looking at companies in the health-care and real estate industries, as well as “boosting bets in financial and mobility firms”.

According to PitchBook, SoftBank’s investments make up a vast chunk of the total market. Last year, $2.4 billion was invested into startups in the region: more than double 2017’s total,. In 2019 thus far, deals have added up to $2.1 billion, with SoftBank-backed transactions making up the bulk of the total.

“This is the kind of capital that has never been seen before in Latin America,” Maciel stated.
Photo Courtesy of Bloomberg

Beyond infusing Latin American companies with cash (in some cases more than tripling their valuations), SoftBank is also invests in local venture capital funds. Back in June, SoftBank launched a partnership with Valor Capital Group: a fund with about $300 million invested in 37 Brazilian companies and U.S. firms looking to expand in Brazil.

“In some cases we’ve more than doubled the investment firepower available to those funds. We don’t have the reach and structure to look at smaller transactions, but those funds do. They can irrigate the system for entrepreneurs,” Maciel told Bloomberg.

According to Reuters, Softbank is in advanced talks to invest in Mexican used car platform Kavak and financial technology firm Konfio. SoftBank made its first known investment in Mexico earlier this year in payments firm Clip, committing roughly $20 million.

Many U.S. venture capital firms, including Andreessen Horowitz, are taking a more serious look at Mexico, said Daniel Green, a partner at Silicon Valley law firm Gunderson Dettmer who advises startups in Latin America.

“The market is having to play catch-up to SoftBank. They are analyzing dozens and dozens of investments,” he said.

Roberto Charvel, an investor at MatterScale Ventures in San Francisco told Reuters,

“Having someone huge like SoftBank coming in really fills the financing gap required in a healthy entrepreneurial ecosystem.”

🇨🇴 Colombia fines Uber more than $629,000 for obstructing regulatory visit

This Monday, Colombia’s commerce regulator said the country will fineUber Technologies Inc (UBER.N) over $629,000 for obstructing a regulatory visit in 2017.

Uber has continuously provoked authorities in Colombia, where use of the ride-hailing service is widespread but illegal. According to Reuters, Colombia “has not specifically regulated transport services like Uber”, but said it will suspend the licenses of drivers caught working for the platform for twenty five years.

The fine from the Superintendency of Industry and Commerce says Uber urges their employees to withhold information from regulators and to block access to company computers. The regulator said these policies were implemented during the October 2017 visit, stating that “the company presented a disrespectful and obstructive attitude in the face of different information requirements on the part of officials” (Reuters).

The fine cites three specific Uber staffers by name, fining them individually between $1,469 and $7,344. The statement stated that two legal staffers and one manager “collaborated and executed the obstruction of the mentioned administrative visit and the incompletion of the orders and instructions imparted by the Superintendency. It is also proven that these people gave evasive and incomplete declarations about their roles and functions inside the company, and about their knowledge of the corporate structure of Uber Colombia” (Reuters).

This July, Colombia ordered Uber to improve its data security in reaction to a 2016 breach that compromised the data of 267,000 Colombians. Uber said in a statement it has not been officially informed of the fine, but would examine it once it has been.

🚺 How two women with ‘big dreams’ created a ranking system measuring gender equality in Latin America’s companies.

Aequales has established the first-ever gender equality ranking system for companies in Colombia and Peru. The company makes a profit by offering training to companies that covers topics such as: unconscious bias, female leadership, long-term strategies, gender-neutral recruitment processes and even “new masculinity” workshops for men that include subjects like gender violence and bias.

Founded four years ago by Maria Perdomo and Andrea de la Piedra, Aequales began with 40 corporations. Today, the company has 800 and has expanded to Mexico.

Aequales takes on a somewhat radical approach in a region where many men still believe women don’t belong in the workplace. According to BBC, the co-founders faced “a lot of scepticism” when they launched Aequales, primarily from business leaders who simply did not understand why it was necessary to implement gender equality.

A 2018 report found gender inequality in business costs countries around $160 trillion because of the difference in lifetime earnings between men and women.

A 2015 McKinsey report found that advancing female equality in the workplace could add $12 trillion to global GDP by 2025.

“But even when women’s participation in the workforce increases, as it has in the LatAm region over the past decade, from 47% to 52%, it doesn’t mean participation is equal. Women in LatAm are more likely to participate in informal or less productive work, rather than high-wage jobs” (BBC).

It’s is not just about pay, however. “Even when women do have pay equality, the issue of not having enough flexibility to be mothers has come up in every single workshop we have carried out with female leaders. Paid paternity leave, female leadership goals and female CEO quotas are all important targets to strive towards,” Perdomo told BBC.

Although Colombia ranks 36th in the World Economic Forum’s 2017 gender gap and education for women in Colombia is fairly progressive – as are attitudes towards women in government office– the National Statistics Office (DANE) reports the gender wage gap is at about 20%.

“Colombia is ahead of so many other countries in Latin America regarding gender equality, so people say ‘oh this is nonsense, there’s no need to talk about that anymore, we live in an equal society,” said Perdomo.

🇦🇷 President Mauricio Macri’s defeat in Primary Vote puts Argentine Business Owners on Defensive

This week, Argentina’s President Mauricio Macri unexpectedly lost a primary vote by a landslide, a foreshadow to his defeat in October’s presidential election and a possible return to the policies of his predecessor, Cristina Kirchner.

Following the vote, Argentina’s international bonds and stocks tumbled in London and New York early trading.

“The scale of Macri’s defeat took pollsters by surprise, yet it reflects widespread public dismay at the country’s direction amid recession, austerity and inflation running at more than 50%” (Bloomberg).

Argentine entrepreneurs and business owners are voicing uncertainty after voters showed a resounding preference for the left-leaning, populist candidate Alberto Fernández, who received 48% of the votes in primary voting that featured 10 parties with presidential nominees. Fernández’s Vice Presidential candidate is former President Cristina Kirchner, who was widely known for butting heads with investors during her 12 years in the presidential palace, both as President and first lady for her predecessor and late husband, Nestor Kirchner.

“[Cristina Kirchner] nationalized pension funds, imposed currency controls and tampered with economic statistics during her time in office from 2007 to 2015” (The Washington Post).

Macri and his running mate, Miguel Ángel Pichetto, received 32%: suggesting their team faces an uphill battle going into the general elections in October.

Investors now face the harsh reality that voters are losing patience with Macri’s market-friendly policies; and are prepared to take a risk on a return of the type of interventionist measures under Kirchner’s administration.

On Tuesday, the currency was trading at about 58 pesos to the dollar: roughly 25% weaker than its Friday close. The devaluation was accompanied by a 38% drop in the Merval stock index and is expected to lead analysts to drastically revise the 2019 inflation outlook of 40% further upward. Last year, inflation reached 47.6%: the highest since 1991. (The Washington Post).

As markets respond to the political uncertainty, many small business owners- already crippled by long-running economic struggles under both Fernández and Macri- are once again fearful.

💰Brazil's Resultados Digitais’ $50 million USD Funding Round

Brazil-based software-as-a-service firm Resultados Digitais (RD) has raised a new funding round led by Riverwood Capital following a “significant shift” in global interest in the country’s technology ecosystem. An investment of 200 million reais ($50 million USD) concludes the company’s fifth funding round.

Riverwood Capital’s Latin American track record includes investments in companies such as ridesharing firm 99: Brazil’s first unicorn, sold to Chinese giant DiDi Chuxing in 2018.

According to the investor, RD has “enormous growth potential”.

Riverwood Capital’s Managing Director Joaquim Lima stated,

“We are confident that this is a company that will create an even more significant impact and boost the whole ecosystem” (Forbes).

According to RD founder and Chief Executive Eric Santos, "last year there was a series of developments that changed the local ecosystem and helped remove that last barrier in terms of beliefs from foreign investors when it comes to backing technology companies in Brazil,” in reference to the numerous exit deals and successful IPOs that have taken place in the country since the sale of 99 in early 2018.

“Brazilian funds continued to invest in the technology sector even when the local economy was doing very badly. A more developed ecosystem means that later-stage [international] investors are developing more of an appetite for Brazilian companies,” Santos added.

The “SoftBank factor” also helps. As stated by Santos, the presence of the mega fund has been positive for the Brazilian technology landscape, and is prompting investors who were adopting a “defensive” approach to alter their strategy. “You can tell there has been a change in terms of investor proactivity and speed in which they operate in Brazil,” he said.

"We want to do business with investors that are more concerned about value creation in the long-run and beyond currency fluctuations: we need to know that backers understand and are committed to the region.”

🎙 Interview with Bibiana Rojas, Managing Director at Canopy Growth Colombia

Global Americans and the Canadian Council for the Americas present “Two gringos with questions,” an interview series featuring political and cultural leaders from across the Americas. In the seventeenth episode, Ken and Victoria speak to Bibiana Rojas, Managing Director at Canopy Growth Colombia.

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Working With Data in Latin America: Challenges and Strategies, SoftBank Leads Financing Round in Brazilian Startup MadeiraMadeira, Revelo Raises $15M Series B, and More from the Region...

Other featured stories include: Ex-Tesla Executive’s Company, MicroPower Bets Big on Batteries, Brazil’s Central Banker Takes On a Stalled Economy, and Analyzing President Bolsonaro’s Threat to Leave MERCOSUR.

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