Chinese investment throughout LatAm, emerging presence of fintech in the region, delivery service streamlining in Brazil, and more...
Report: Where China is most heavily investing in Latin America
Since 2005, China has invested more than $141 billion in loans into the Latin American and Caribbean region, an amount greater than the lending from the World Bank, Inter-American Development Bank (IDB) and CAF Development Bank of Latin America combined.
China’s Belt and Road Initiative (BRI) aims to expand overseas investment by building infrastructure for land and sea routes across the world. The Chinese BRI claims to help developing countries improve their infrastructure and capitalize on trade opportunities with China. (Latin America Reports)
90% of this $141 billion dollar Chinese investment has been directed to four Latin American countries: Venezuela, Brazil, Ecuador and Argentina.
From 2001 to 2018, Venezuela has received $67.2 billion from China. More recently, these investments served as a lifeline for President Maduro as the country slipped into economic crisis.
Although a member of the Chinese-led BRI, investments into Venezuela have significantly declined since the death of former President Hugo Chávez, made evident by China’s $21.4 billion loan in 2010, which decreased to $5 billion in 2018.
However, current President Bolsonaro presented a strong anti-China rhetoric during his campaign, despite the $29.8 billion Brazil had received by 2018. This relationship has potential to improve, however, as Brazil is hosting the BRICS (Brazil, Russia, India, China, South Africa) Summit in November. In addition, President Bolsonaro has accepted an invitation to visit China in the second half of this year.
Although it is one of the smallest Latin American nations, Ecuador has received $18.4 billion from China since 2009. A majority of these deals were agreed with former President Rafael Correa, including a decisive deal that would send 90% of Ecuador’s crude oil to China until 2024.
El País reported that current President Lenín Moreno travelled to China in December 2018 to obtain a $900 million loan, despite the fact that he hasn’t compromised future Ecuadorian oil. The country currently owes China $6.5 billion.
Argentina has received $16.9 billion from China over the last twenty years, with many agreements linked to agriculture.
Historically, China has been the largest importer of Argentine soy since 2000. In 2018, President Mauricio Macri signed 30 agricultural and investment deals with China worth over $5 billion.
Brazilian fintech Nubank launches in Mexico
David Vélez, founder and CEO of Nubank, said in a statement,
“We’ve been studying the Mexican financial system for a few years and we heard from a lot of customers about the challenges and headaches they face with existing services. These services have forgotten to put the consumer at the center of their strategy and their products. On top of that, more than 36 million Mexicans currently don’t have any access to the bank system – and we want to contribute for this situation to change” (Latam List).
Nubank’s Mexican subsidiary Nu hopes to transform the country’s financial system the same way it did in Brazil over the past six years.
Currently, Nubank has raised roughly $420M in seven investment rounds and employs around 1,5000 people.
The company is working to recruit top tier Mexican talent in efforts of transforming the country into a “hub for technology, data science, and design”.
According to Vélez,
“We were impressed by the level of talent that exists in Mexico and look forward to making a significant investment in the Mexican technology ecosystem”.
Brazilian unicorn iFood partners with scooter company SCOO to expand delivery services
Brazilian unicorn iFood is evaluating other forms of transportation to streamline its processes to better reach its 12.6 million active Brazilian users.
iFood recently partnered with SCOO, a Brazilian electric scooter rental startup. This partnership hopes to bridge the gap and create new opportunities for people who want to earn extra money delivering with iFood, but lack access to vehicles.
The monthly fee for scooters rentals is roughly R$100. For those who can’t afford that, iFood will subsidize part of the initial cost to incentive more drivers joining their delivery service.
“As of this week, over 150 deliverers around Avenida Paulista and Vila Olímpia in São Paulo used scooters to drop off packages. By the end of the year, iFood aims to have about 1,000 scooters running in São Paulo and Campinas” (Contxto).
In addition, iFood is looking into alternatives such as the iFood Box, inspired by Amazon’s service in the U.S.
“The idea is to have cabinets in public areas such as parks, airports and universities. Another possibility is that restaurants will have their own lockers for pick up orders, which will cut down queues and shipping costs” (Contxto).
Mexican central bank holds rates and warns wage hikes could hit prices
This Thursday, May 16, Mexico’s central bank said wage increases have outstripped productivity gains in some sectors, posing risks to inflation and employment, as it held its benchmark interest rate steady.
The Bank of Mexico’s (Banxico) board members voted unanimously to hold the overnight interbank rate at 8.25 percent, the level it has been at since Dec. 20. The rate is presently at its highest level since 2008 (Reuters).
In a post-meeting statement, a Banxico representative stated,
“Given the magnitude of the increases to the minimum wage, in addition to their possible direct impact, there is the risk that these bring about high wage revisions in several sectors… some sectors these have exceeded productivity gains and could give rise to cost pressures, thus affecting formal employment and helping to keep core inflation at high levels”.
Mexico’s annual inflation accelerated to a four-month high in April, as consumer prices rose by 4.41% in the year through April.
According to preliminary data, Mexico’s economy has been sluggish, contracting 0.2 percent during the first quarter from the October-December period.
Mexican university partners with Amazon Web Services to support startups
Mexican university Tecnológico de Monterrey and Amazon Web Services (AWS) have announced a partnership that will support more than 500 Mexican startups by providing up to $10K in credits on AWS cloud services platform.
Students and graduates from Tec de Monterrey and other educational institutes within the Instituto de Emprendimiento Eugenio Garza Lagüera (IEEGL) ecosystem have the opportunity to benefit from this partnership.
Startups going through an incubation process can receive up to $5,000, while startups going through accelerator can earn up to $10,000. The AWS credits will help them cover tech services costs within the platform for two years.
Hugo Garza, IEEGL’s Director at Tec de Monterrey, said
“This partnership allows entrepreneurs to develop their businesses on a world class platform. One of our commitments as an institution is to give Mexican entrepreneurs access to useful tools to create value proposals that can transform industries” (Latam list).
Video: IMF Managing Director Lagarde says cryptocurrencies are ‘clearly shaking the system’
In light of recent articles highlighting the emerging role of fintech and cryptocurrency in Latin America, this interview with IMF Managing Director Christine Lagarde discusses to the changing business models of commercial banks as evidence that innovations like cryptocurrencies are having a clear impact on financial sector incumbents.
“I think the role of the disruptors and anything that is using distributed ledger technology, whether you call it crypto, assets, currencies, or whatever ... that is clearly shaking the system,” she said.