Harvard Business Review: Entrepreneurs, Look to Your Network to Help You Through the Pandemic; Argentina’s Government Extends Debt Restructuring Deadline until June 12; Embraer Negotiating $600 Million Bank Financing for Exports; and More…

Other featured stories include: Brazil’s Rescue Plan Flaws Imperil Small Business Recovery; MercadoLibre: The ‘Amazon Of Latin America’ Continues Expansion; Cortex raises $22M led by SoftBank’s Latin America Fund; and an In Depth Look at Chile’s Telecoms Market.

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June 5, 2020

Harvard Business Review: Entrepreneurs, Look to Your Network to Help You Through the Pandemic

On March 21, 2020, just eight days after its first confirmed COVID-19 case, Guatemala’s government issued a nationwide lockdown. That same day, Marsa, an innovative and rapidly growing driving school in the country’s second-largest city, Quetzaltenango, pulled the emergency brake on a 20% fleet expansion.

“We were staring at financial ruin… Our whole family, all involved in Marsa, stayed up all night as the initial shock gave way to racking our brains on how to respond, recalled Saul Calderon, the company’s CEO.

Unlike many other business owners that night, Calderon had an idea of whom he could turn to for help. Two years earlier, Calderon and the owners of 17 other local ventures in Quetzaltenango (commonly called Xela) had joined together through Scale Up Xela, an entrepreneurship ecosystem-development program supported by a national private-sector civic organization called Fundesa.

Daniel Isenberg, Vincent Onyemah, and Dhirendra Shukla serve as advisors to Fundesa, which also receives support from local banks, universities, and corporations. Via workshops and a seven-month training program, the initial 18 owners and their teams grew to know one another’s strengths and weaknesses, and created a private WhatsApp group to maintain their bond and share needs and resources.

On March 21, just hours after the lockdown, the WhatsApp group for Scale Up Xela lit up with hundreds of messages — from updated information to encouraging words. The following day, the group organized a Zoom meeting to brainstorm ideas for new growth, and the companies involved in the network immediately began developing new plans. The ecosystem they’d created granted each business owner immediate access to more resources and support than they would have had on their own, which opened up opportunities for creative solutions to this new problem.

The Harvard Business Review provides four practical and broadly applicable lessons that have already been learned by observing how these networks like Scale Up Xela  have responded to the pandemic.

1.Give your network an identity.

Right from the start, lock down an evocative name (as in, “Scale Up”) and a memorable address to turn to (Scale Up Xela, Scale Up Milwaukee). These things spur forward-looking action, provide comfort to entrepreneurs, and serve as a useful focal point for everybody involved in the network. They can also convey a hopeful, positive message of growth and success.

2.Set up Information-Sharing Early — and Use it Often.

We’re now acutely aware of the importance of frequent and accurate communication during a crisis like this one, and of how much faster and more effective communication can be if processes for sharing are in place before the crisis starts.

3.Collaborate in New Ways to Meet Market Needs.

COVID-19 has upended business models all over, but it has also created new needs, making this an opportune moment to try out new business alliances.

For instance, a driving school and a brewery might seem like a strange partnership. However,  the day after Guatemala’s lockdown, Marsa teamed up with GUIN, a brewery in the Scale Up Xela network, and came up with a plan to use Marsa’s suddenly idled fleet of cars to make home deliveries of GUIN’s beer. In parallel, Marsa used the network to team up in a similar way with a pharmacy, a supermarket, and a hardware store, all of which were able to begin distributing their products to homes for the first time. Not only that, GUIN partnered with another Scale Up Xela member, CIAN Coders, to develop a new digital platform for payment and inventory control. This helped GUIN expand its delivery capacity and sell to other home-distribution partners in Guatemala City, 60 miles away.

4.Connect Across Ecosystems

Particularly in crises, networks can produce previously unforeseen opportunities in advanced and emerging economies — and that only becomes more possible when networks open themselves up to one another.

At the University of New Brunswick, Dhirendra Shukla created Gray Wolf Analytics, a team of students and faculty that worked to uncover and halt human trafficking using blockchain. When the pandemic erupted, they re-deployed their team to contact tracing and called themselves Safe Contact — but they needed help with scaling. To find it, they reached out to Scale Up Atlantic Canada, where they connected with executives of two technology businesses, Measurand and Kognitiv Spark, who advised them on how to accelerate the launch of Safe Contact and steer it to market.

Paradoxically, social isolation and the pivot to video conferencing makes it as easy for entrepreneurs to explore opportunities to expand domestically and internationally. The only thing missing is to connect the links in the value chain from supplier to market. The beauty of connecting ecosystems is that you can connect dozens of companies in one market to dozens of companies in another market with one carefully curated conference.

Argentina’s Government Extends Debt Restructuring Deadline until June 12

On Monday, Argentina extended the deadline to negotiate with its creditors to June 12 -  a move that could sweeten the country’s most recent restructuring offer, after a previous proposal was deemed insufficient by some investors.

According to Reuters, Argentina’s government is assessing “additional adjustments” to its offer “with a view to maximizing investor support without compromising its debt sustainability goals,” it said in a statement.

“We are working on the final amendments to the offer but the margin that remains for adjustment is thin,” Economy Minister Martin Guzman said separately, adding that the deadline would be extended again after the offer is amended in order to provide time to ink a final deal.

The government is looking to revamp roughly $65 billion in bonds that have been rendered unsustainable by a long recession and currency decline. Argentina is already in default after having missed an interest payment extension on May 22.

Graphic Courtesy of Bloomberg

                                                 Graphic Courtesy of Bloomberg

The current offer received backing from the International Monetary Fund, which said on Monday it would set the country on a sustainable debt management path and that Argentina had little room to improve it.

“There is only limited scope to increase payments to private creditors and still meet the debt and debt service thresholds,” an IMF statement said.

Reuters reports that economists said the government could potentially negotiate down to 50 cents on the dollar, with the remaining gap in bargaining positions bridged by an offer of warrants that would tie the performance of new bonds issued in the restructuring to the future performance of the economy.

“There are some bondholders who want this kind of instrument, so it would help. But the government needs to offer more cash in the first years,” said Gabriel Zelpo, director of Buenos Aires economic consultancy Seido.

Embraer Negotiating $600 Million Bank Financing for Exports

Brazilian planemaker Embraer SA, the world’s third largest commercial jet builder, should obtain $600 million in credit lines from Brazil’s state development bank BNDES and private banks in June, government sources said on Sunday.

According to The New York Times, the loans will finance production to meet demand for passenger planes and executive jets.

A spokesman for Embraer confirmed that the company is in talks on financing proposals from the BNDES and private banks in Brazil and abroad aimed mainly at providing working capital to cover plane exports. Embraer said it has firm orders for the years ahead worth $16 billion on March 31.

“This shows how sound and balanced the company is in the midst of the crisis hitting the aviation sector,” an anonymous source said.

The Brazilian government has been negotiating a financial bailout for the country’s airlines to help them cope with the large loss of business during the coronavirus pandemic.

The bailout involving BNDES should be decided by the start of July, and Embraer could receive some $400 million of that aid package that is expected to include bond issues, sources said.

Brazil's Rescue Plan Flaws Imperil Small Business Recovery

Most of Brazil’s small businesses- which make up more than half of the country’s jobs and 30% of gross domestic product- are not getting the cash President Jair Bolsonaro pledged to help them through the coronavirus crisis, putting recovery at risk.

Reuters reports that despite a $7 billion program to help small and medium-sized businesses pay their workers, banks have so far only distributed 5% of the funds, Economy Ministry data shows.

Jose Eutimio Brandao Jr., who fired 50 of the 170 people he employed at a bar, restaurant, bakery and nightclub in the northeastern state of Alagoas, is just one of the many Brazilians affected. Brandao wanted a loan to help pay his remaining staff, but says his bank turned him down because his group’s total revenue surpasses a 10 million reais ($1.9 million USD) ceiling.

“(The) interest rate is low, equal to the then benchmark Selic, at 3.75% a year, the banks won’t make money with it,” Brandao told Reuters.

A survey by small business industry group Sebrae found that some 86% of firms that sought loans had not received them, with 28% still awaiting an answer.

Meanwhile, BNDES, Brazil’s state development bank, is in talks to bail out airlines like Azul and Gol Linhas Aereas Inteligentes, jetmaker Embraer and even the local units of multinationals like Volkswagen (VOWG_p.DE) and General Motors.

While some big corporate rescues have suffered problems, the small business program’s limitations have reinforced a perception of inequality in Latin America’s largest economy. Central Bank data on Brazil’s total loan book shows that Brazilian banks extended 442 billion reais in new loans over the last two months, but almost 60% went to large corporations.

The Economy Ministry said in a statement to Reuters that it is working on alternative credit lines, and that it is already subsidizing the payroll loan program.

Many business owners, unsure about their future revenues and concerned they will be taking on debt that will be tough to repay, say they are reluctant to apply for the aid. Unlike the U.S. Paycheck Protection Program, which forgives the loan if used to pay employees, the funds offered in Brazil are liabilities that would add to a company’s debt. Instead, firms are firing staff or cutting salaries.

Only 40% of the small businesses polled by Sebrae sought loans, although 90% say they lost revenue during the pandemic.

Even among those who did try to borrow, many said they struggled with the complexities of the program, which include having a bank manage payrolls and risk analysis by the banks, which include Itau Unibanco, Banco Bradesco and Banco Santander Brasil, administering the scheme.

These banks must also provide 15% of each loan, which critics say has made them overly strict in considering applications because their own capital is at risk.

“The reach of payroll credit has been overestimated, as most targeted companies do not comply with requirements,” Cassio Schmidt, Santander Brasil’s director of retail loans, said.

Schmidt explained to Reuters that the bank has been less strict for the payroll loan, but is still flagging obvious risks, such as borrowers more than 30 days in arrears on existing loans.

But many businesses say banks are avoiding a program they view as risky and offering too little profit.

“Banks do not want to run the risk, they know restaurants will struggle for a long time,” said Paulo Solmucci, head of Brazil’s restaurants association, which represents 6,000 businesses, explaining that most of them did not get loans.

The program also requires companies to process their payrolls through one of Brazil’s largest banks, giving small businesses, many of which electronically transfer funds to employees or pay cash, an added hurdle. To broaden the program’s reach, the government is considering changes such as allowing companies to fire up to 50% of their workforce and raising the revenue limit to 50 million reais, central bank chief Roberto Campos Neto said this week.

But borrowers under that program- which is not yet operational- must start repaying the loans within a month, a tough ask for companies that have no idea of when they can resume activities, at least three businessmen told Reuters.

While the government has promised to make up for 85% of potential losses under that program, banks are responsible for the full amount of the initial loan, making them even more cautious, one executive told Reuters, on condition of anonymity.

Bolsonaro’s economic team rolled out yet another program in late May for which small businesses will also be eligible, using funds from an existing state development bank fund.

MercadoLibre: The ‘Amazon Of Latin America’ Continues Expansion

MercadoLibre, the triple-threat regional financial powerhouse, is one of Latin America’s fastest-growing companies, having just turned in a stellar first quarter in a region that has more complexities than any of its northern neighbors.

MercadoLibre is an eCommerce platform similar to Amazon, with its own payments infrastructure that has grown into credit, mobile payments and asset management capabilities. It now operates in 18 countries in Latin America.

According to eMarketer, eCommerce made up about 4 percent of the total spent last year in Latin America, due mostly to its cash-heavy economy. The company’s total revenue increased by 59 percent in 2019 to $2.30 billion, while first-quarter revenue increased by 38 percent to $652 million.

Pymnts reports that MercadoLibre describes its marketplace as the “Amazon of the company.” As many stateside eCommerce companies saw in the early weeks of the pandemic, sales of all goods started out slowly at the end of March. However, from then until May, the platform saw similar spikes to Amazon. Its growth rate in April accelerated to 75.8 percent year over year for items sold and it saw a 72.6 percent growth in revenue.

The credit and payments arm is executed through a different platform called Mercado Pago. Osvaldo Giménez, executive vice president and CEO of FinTech, which includes Mercado Pago, told PYMNTS that the region is complex, with different regulations governing each of the 18 countries where it trades.

“I would say the most relevant variables across Latin America are banking penetration and credit card penetration… One difference is the use of debit cards online. For example, in Brazil, it’s very hard to use debit cards online, as most issuers don’t let consumers perform online credit card transactions. Since some people don’t have access to bank accounts or online payment methods, there is an option to pay using cash in most countries,” Gimenez noted.

Mercado Pago launched as the eCommerce industry took off in 2003, and has seen a surge in usage with the pandemic.

According to Pymnts, its growth during the second half of March was 95.4 percent year over year. By April, the growth rate had accelerated to 155.6 percent. Unique active users grew 30.9 percent, reaching 43.2 million. Total payment transactions increased 102 percent year over year, totaling 290.7 million transactions for the quarter.

With 18 countries and 600 million people squeezed into a relatively small geographical area, cross-border payments are a standard business practice for Mercado Pago. That means anti-fraud measures have 18 different varieties, as do other financial regulations. Thus, fighting fraud is one of Gimenez’s priorities.

“In many cases, you see increased attempts at fraud with cross-border transactions… “In some cases, these are drop-shipped transactions where someone is typically shipping from China into Latin America. And the extra challenge is that shipping times are usually longer. If the user does not receive whatever he or she is buying from China, it takes longer to realize that, and they may have already settled the payment with the merchant. We also used to see spikes in fraud attempts coming from Eastern Europe, but we’re not seeing that anymore,” Gimenez added.

Mercado Pago has also capitalized on mobile payments by launching mPOS capabilities and a mobile wallet. In Q1, its mobile wallet delivered $1.3 billion in transactions, leading to 299.2 percent in YOY growth. Its mobile consumer base grew by 155.1 percent compared to the first quarter of 2019, surpassing eight million unique users.

“This is a wallet that enables peer-to-peer transactions, but you can also pay for utilities, top off your mobile phone and do QR code co-payments. Our QR code payments have been growing significantly, first in Argentina and then in Brazil, and we recently launched in Mexico to provide an offline alternative. mPOS enables consumers to drive acceptance, but they still have to buy a device. With QR codes, they don’t need to buy anything — they just download our app and can start taking payments right away, with cards or debit or any payment methods available on Mercado Pago,” said Gimenez.

All of the MercadoLibre fintech products have been created, designed and deployed in-house, which Gimenez said comes with the territory of being a regional specialist.

“The reason we had to develop so many things in-house when we started Mercado Pago was that we didn’t find a solution in the market. Even today, when we look at our competitors, most of them are already strong in one or at the most two countries. Nobody’s serving the entire Latin America region, probably because of the complexity and scope of the products we serve,” he said.

Cortex Raises $22M led by SoftBank’s Latin America Fund

Cortex, a Brazilian Growth Intelligence SaaS startup, raised a $22M Series B led by SoftBank’s Latin America fund. Redpoint eventures and Endeavor Catalyst also participated in the round.

As reported by LatAm List, Cortex is the Brazilian leader in Growth Intelligence, using data science to improve corporate communication, marketing, and sales for companies. In addition, Cortex software works to enhance real-time measurement and ROI for digital marketing campaigns which helps to predict and forecast sales in advance.

Cortex proved its innovation ability with the adaptation of one of its cloud-based solutions for team communication at the beginning of the COVID-19 pandemic, which aided many companies with the transition to remote working.

“After closely studying this Latin American sector, it became clear to us how many companies value Cortex’s powerful data intelligence tools,” said Paul Passoni, a Softbank Partner.

Cortex serves many global customers including Carrefour, Claro, Visa, and Unilever. This recent funding will allow Cortex to further develop the platform’s technology and stimulate growth in marketing, sales, and customer satisfaction.

“With this new investment, we are strongly positioned for fast growth and our goal of spreading a data-driven mindset and business culture through our Growth Intelligence platform,”  said Daniel Pires, Co-Founder and Chief Customer Growth Officer at Cortex.

An In Depth Look at Chile’s Telecoms Market

Chile ended 2019 with 25 million mobile lines (down 0.5% from 12 months before), 3.43 million fixed broadband accesses (up 5.5%), 3.26 million paid TV subscriptions (-2.1%) and 2.7 million landlines (-8.2%), according to figures from regulator Subtel.

BN Americas examines how the main providers are faring and their latest investment plans.


In May, mobile market leader Entel activated the first 4G base station in the remote coastal locality of Caleta Tortel after connecting the country’s Fibra Óptica Austral (FOA), a fiber system in the far south to serve the 300,000 Chileans in Patagonia.

With this move, hundreds of people in the Aysén region can now access mobile broadband services for the first time thanks to the public-private initiative between the operator and Subtel.

The 4,000km network of submarine and terrestrial fiber connect Puerto Montt and Puerto Williams, south of Tierra del Fuego, with stretches and landings reaching other localities along the way.

Entel said in May it now plans to invest 371 billion pesos (US$472 million) in 2020, some 10% less than in 2019, partly due to the economic fallout sparked by the COVID-19 pandemic.

Of the total, 71% will go to domestic operations and 29% to Peru, where the company plans to continue expanding its Entel Perú business.

Some 100 billion  pesos are destined for mobile networks, 67bn pesos for fiber networks and 50bn pesos for B2B services. According to the latest statistics from Subtel, Entel accounted for roughly a third of all mobile lines in December 2019.


In April, the Chilean government awarded UK-based Novator’s WOM a contract that includes an 86 billion-peso subsidy to build the 10,000km fiber backbone known as Fibra Óptica Nacional (FON).

The agreement is for the construction, by December 2022, of five of the six stretches that comprise FON. WOM’s part involves over 7,000km of cables.

WOM is also planning to launch a fixed line service in Chile in the near future, starting with fiber broadband services in Santiago, after getting the permit from Subtel.

The company reported revenues of 142 billion pesos in Q1, up 18% year-on-year, and a subscriber base of 6.4mn, 20% more than in a year earlier.

Since it launched five years ago, WOM has led number portability rankings for 53 consecutive months, which gave it 21.4% of the mobile market by Q1, according to the company.

According to Subtel, WOM had 19% of the mobile market at the end of 2019. Despite the pandemic, WOM said it is sticking to its investment plans, focusing mainly on the deployment of its 4G network throughout the country. The company said it reached 4,549 active sites (cellular antennas) at the end Q1.

“The good results we have had are a reflection that our commercial and financial operation is healthy and profitable, and therefore, we reiterate our intention to continue investing in the country, particularly through the participation in the next spectrum auction, which will enable the 4G network to be strengthened and 5G technology to be developed,” CEO Christopher Laska told local papers.

Chile planned to award 700MHz, AWS, 3.5GHz and 28GHz bands this year, but is still awaiting a supreme court decision on spectrum caps.


Liberty Latin America’s VTR Globalcom is the largest provider of pay TV and fixed broadband in the country. It is also the second biggest provider of fixed telephone services, behind Telefónica.

According to Subtel, VTR led the fixed broadband market with 38.4% of all 3.43mn customers at end-2019, up 4.6% from December 2018 – the fastest growth rate among the larger players.

Movistar came next with 27.6% of all 2019 accesses, but in constant decline at least since October 2014, while América Móvil’s Claro had 13.1%.

In pay TV, VTR led with 33.6% of the 3.25 million customers, followed by DIRECTV (21%).

The company received a lot of criticism from customers due to the oscillation of networks and a drop in service quality in the first weeks of the pandemic, as well as difficulties in contacting the call center.

Subtel reportedly received 5,732 complaints about VTR between March and mid-May, of which 95% were related to telephone and fixed internet services, and television.

The company admitted the problems, saying traffic soared 40% in March alone and call center agents needed to work from home, but also attributed part of the disruptions to an increase in vandalism since last October amid the country’s social unrest.

Because of this, VTR decided to accelerate its investment plans for the year and spend most of the amount in April and May, focusing mainly on increasing the network’s capacity.

In the first quarter, Liberty Latin America’s quarterly revenue fell 1.2% to US$931 million, with VTR/Cabletica contributing to US$240mn (-13.2%). Ninety percent of VTR/Cabletica’s revenues came from the fixed business, 7% from mobile and 3% from B2B.


Through Movistar, Telefónica led Chile’s fixed telephony market with 39% of all lines in service at end-2019, followed by VTR with 20% and EntelPhone (17.2%).

The Spanish group is studying ways to divest its HispAm operations, which includes the Chilean business. In the meantime, though, it’s business as usual. The group’s HispAm investment strategy focuses on the growth of the highly profitable mobile postpaid market and fiber accesses.

The company recently signed content agreements with OTT providers to transform its fiber IPTV platform into an entertainment hub.  Overall, Telefónica HispAm’s January-March capex (which excludes spectrum and Telefónica Infra) totaled 325 million euros (US $365M), up 9.5% as reported and 19.7% organically year-over-year.

Reports say Telefónica hired Banco Santander to help sell 50% of Chilean fiber optic subsidiary Infraco. Telefónica leads the local fiber broadband market, accounting for 611,000 of the roughly 1 million active fiber accesses by end-December, up 17% on a year before.

According to Telefónica, the growth was bolstered by a 33% increase in homes-passed, mainly in capital Santiago. Most of the 310 million euros invested in Chile last year by Telefónica went to FTTH deployment, but it missed the self-imposed target of nearing 900,000 homes-passed.


Likely due to the imposed stay-at-home measures, with clients needing more reliable fixed networks and mobile data, Claro’s sales of postpaid plans jumped 50% in April over the month before, according to press reports.

Concurrently, number portability from other companies to Claro nearly doubled in April compared to March, while the sale of accessories increased almost 10 times, the reports said.

Overall, Claro has half a million fixed internet subs in Chile and 23% of the local pay TV market, which is by far the most disputed telecom segment in the nation.

However, Claro’s Mexican parent América Móvil admitted it could reduce its previously announced US$8.5B global capex for 2020 (which was flat compared to 2019) due to the COVID-19 crisis.

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