Colombia Orders Uber to Cease Ride-Hailing, E-commerce Growth to Exceed 20% in Latin America by 2021, Brazil Proposes Central Bank Bill to Gird Against Banking Crisis, and More from LatAm

Other featured stories include: Mexico Seen at Least Risky Level Since 2014, Even as the Economy Sputters, Brazil Proposes Central Bank Bill to Gird Against Banking Crisis, Solar Provider Group Plans to Invest $250M in Brazilian Solar Market, and Argentina’s Satellogic Announces US$50 Million in Funding

Colombia Orders Uber to Cease Ride-Hailing, Cites Competition Rules Violation

Last Friday, Colombia ordered Uber to terminate its ride-hailing operations, effective immediately, after a judge ruled the company violated competition rules.

This ruling follows a lawsuit filed against Uber by COTECH SA, the Superintendency of Industry and Commerce (SIC), claiming the American company had breached market rules.

While Uber has more than 2.3 million active users in Colombia and around 88,000 driver partners, the app has existed in a “regulatory no-man’s land” in the country. As reported by  Reuters, the Technology Ministry deems ride-hailing apps legal while transport authorities say they are against the law.

In a statement, the SIC said Uber generated “a significant advantage in the market” by rendering transport services for individuals via its application. The SIC stated that following analysis, it ordered Uber’s ride-hailing services “through the use of the Uber application to cease immediately” (Reuters).

This order applies to Uber, UberX and Uber VAN. Andres Barreto, head of the SIC, stated that other Uber services, including food-delivery service Uber Eats, were not prohibited by the ruling.

The company said in a statement that it rejects the ruling and immediately appealed it.

"This decision reflects an act of censorship and infringes on the Inter American Convention on Human Rights, which has already condemned attempts to block Uber for violating the neutrality of the web, liberty of expression and freedom of internet,” Uber said in a statement.

Back in August, Uber was sanctioned with a fine of over $629,000 USD for obstructing an administrative visit and failing to comply with SIC orders.

E-commerce Growth to Exceed 20% in Latin America by 2021

The e-commerce sector is expected to see a double-digit boost in Latin America within the next couple of years, with Mexico and Brazil being the top performers in the region, according to a new study, based on research by DHL.

As reported by ZDNet, e-commerce in the region is expected to grow by 22% by 2021, up by 25% in Mexico and 17% in Brazil.

Mexico and Brazil are considered part of larger markets segment, while countries like Colombia, Argentina and Chile are considered medium-sized markets, and Central American and Caribbean nations are considered small markets. According to the study, medium and small markets have substantial potential for cross-border e-commerce, with the ability to cater to consumers in a fast and cost-effective manner.

Bottlenecks to e-commerce in the region include slow customs clearance, congestion and sub-standard infrastructure for last-mile delivery, and the inherent complexity of reverse logistics processes for returns.

“The industry is still relatively developing in the region, so there is still room for retailers to lay a foundation and for logistics operators to support them by building supply chains for efficient e-commerce,” said Matthias Heutger, Global Head of Innovation. and commercial development at DHL (ZDNet).

As reported by Forrester Research, consumers in Argentina, Brazil, Chile, Colombia, Mexico, and Peru will spend $129 billion online by 2023, representing a compound annual growth rate (CAGR) of 22.3% from 2018.

Brazil Proposes Central Bank Bill to Gird Against Banking Crisis

On Monday, Brazil’s government sent Congress a bill designed by the central bank to regulate financial firms during a banking crisis that mandates the use of public money for bail-outs, but only as a last resort.

If approved, the bill would create two new mechanisms to dictate how different financial firms would be treated.

The first, the “Stabilization Regime”, targets larger banks that pose a risk to the country’s banking system, but will require specific secondary legislation to dictate how firms are chosen.

The second, known as the Compulsory Settlement Regime, is aimed at smaller entities and focuses on removing the company’s senior managers and board. As reported by Reuters, the company and shareholders’ money would be prioritized in the case of any losses. Failing that, losses would aim to be covered by the industry itself, with contributions from other banks to an emergency fund known as the Credit Guarantee Fund.

According to the bill, only as a last resort would the Brazilian government get involved and provide a publicly funded bail-out.

According to Reuters,

“Brazil’s Fiscal Responsibility Law currently bars the government from bailing out banks, although specific laws can be passed during times of financial crisis to circumvent the law and provide public assistance.”

The latest bill aims to modernize the government’s actions during a banking crisis and put greater responsibility on the banks themselves to cover their losses, therefore creating less of a burden on Brazilian taxpayers, said Climerio Leite Pereira, the head of the central bank’s resolution and sanctions department.

Mexico Seen at Least Risky Level Since 2014, Even as the Economy Sputters

Low inflation, tight public spending and a reduction in the debts of loss-making state oil giant Petroleos Mexicanos (Pemex) have helped improve Mexico’s so-called risk profile, which reached its “safest” level in five years in December.

According to Reuters, risk premiums of investing in Mexico- as measured by traders in credit default swaps (CDS)- hit their lowest level since November 2014 despite business and investor concerns about the economic management of the leftist government under President López Obrador.

Economic growth has come to a halt during AMLO’s first year in office, who has repeatedly criticized excessive free market liberalism for ruining Mexico. Analysts expect growth to be weak next year too (Reuters).

However, inflation is below the central bank’s 3% target and Lopez Obrador has lowered trade tensions with the United States, in addition to Mexico avoiding the widespread social unrest that has shook many emerging markets in 2019, especially in Latin America.

“Against this backdrop, Mexico’s five-year CDS - a barometer of a country’s default risk - was quoted at 75 basis points earlier this month. On Monday, it stood at 81 basis points.”

The current CDS level, also known as the spread, means that an investor pays about $8,100 annually to insure $1 million in Mexican sovereign debt against default.

“The stable debt-to-GDP ratio, contained inflation, a central bank with a good reputation and the government’s fiscal discipline” have made Mexican debt very attractive and low risk,”  said Jose Luis Ortega, director of debt investments at asset management firm BlackRock.

AMLO’s government, which is running a bigger primary budget surplus than planned this year, has promised to lower to 45% the debt-to-GDP ratio, which touched 50% in 2016. The president has also vowed to revive Pemex- the world’s most indebted oil company- cutting its financial debt by around $7 billion this year through refinancing operations.

Pemex’s debt still stands close to $100 billion, however, and is viewed as a major risk to the financial stability and creditworthiness of the Mexican economy.

The CDS risk rating hasn’t always reflected favorably on the administration of President Lopez Obrador, who worried investors by cancelling a part-built $13 billion Mexico City airport five weeks before taking office in December 2018. At their worst, CDS spreads on Mexico shot to 147 basis points after he assumed power.

Solar Provider Group Plans to Invest $250M in Brazilian Solar Market

Solar Provider Group (SPG), a Toronto, Canada based global solar development company, has arranged a team to enter the Brazilian solar market with the goal to complete investments totaling $250 million USD over the next five years.

As reported by Business Wire, the solar market in Brazil is growing exponentially, with 3.3 GW deployed in 2019 alone, 44% growth since 2018, and an estimated 126 GW by 2040.

Public opinion and support has been essential for this substantial growth. A recent survey by Ibope Inteligencia reported that 93% of Brazilians want to produce their own renewable electricity at home. In a 2015 survey done by DataSenado, 85% of Brazilians supported more public investments in renewable energies, such as solar and wind.

Photo Courtesy of American Energy News

                                            Photo Courtesy of American Energy News

The Brazilian government’s goal is to attract US $8 billion in private direct investments, generating more than 160,000 new jobs.

As reported by Business Wire,

“SPG believes that the Brazilian market has the right set of opportunities that fit perfectly into the company’s global strategy. With a track record that spans 11 countries and over a dozen US states, the company excels at executing in young, fast-growing solar markets.”

To achieve their ambitions goals, SPG is looking for local development partners in Brazil, as well as corporate buyers of energy. The SPG team is led by Cesar Frota, a veteran executive in the renewable power industry.

“I am excited at the opportunity the Brazilian market represents, for both Solar Provider Group, and the global solar industry. We look forward to building strong partnerships and providing clean, sustainable energy to my home country of Brazil,” Frota said.

Argentina’s Satellogic Announces $50 Million in Funding

According to recent correspondence with Contxto, Argentina’s Satellogic closed a $50 million USD round from new, as well as existing, investors.

Satellogic is the first vertically integrated geospatial analytics company. The company says it is capable of delivering affordable end-to-end geoanalytics imagery at high-frequency and high-resolution, which basically means regularly updated and hyper-precise pictures of the globe.

Previous backers like China’s Tencent and Brazil’s Pitanga contributed to around 40% of the total amount. New strategic partners include the Inter-American Development Bank, through its IBD Lab. According to Contxto, IBD Lab’s contribution to the proceeds will be destined to the creation of user-end satellite imagery.

IDB Lab’s financing will be specifically directed towards the Satellogic’s development of user-end satellite imagery solutions in sectors such as agriculture, cattle farming, and natural disasters.

“We’re excited to support Satellogic’s mission of democratizing access to geospatial analytics solutions,” said Tomás Lopes Teixeira, Senior Investment Officer at IDB Lab.

A few months ago, the company closed a US$38 million deal with ABDAS, a Chinese data science company.

Equipped with access to a dedicated satellite constellation provided by Satellogic, ABADAS will be able to map in monthly updated images the current status of its territory in the Chinese province of Henan, which will result in the support of key policy decisions while outsourcing both logistics and operational risks through accurate, regular data.

Satellogic is experiencing significant commercial momentum, and we’re grateful to have investors that want to fuel that growth and help us service the demand for our Dedicated Satellite Constellation (DSC) and Dedicated Satellite Services (DSS) solutions,” said Satellogic Founder and CEO, Emiliano Kargieman.

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