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February 1, 2019

LATAM Business Weekly - Issue #11

Mexican fintech company Fondeadora raises $1.5M to grow neobank services

Mexican Fintech company Fondeadora has raised $1.5M in their most recent investment seed round, led by IGNIA Partners.

Fondeadora’s open banking platform allows users to manage their money via a digital app, working to eliminate discomforts of the traditional banking system.

The company has over 400,000 users and a 15,000 person wait list for the Fondeadora global Mastercard.

According to Fabrice Serfati, Managing Partner of IGNIA,

“The fintech sector represents a very attractive opportunity for Mexico, a region where there is a market that needs open and equitable financial options. In IGNIA we have partnered with different business models, with exceptional entrepreneurs within the fintech sector. Fondeadora’s highly innovative solution has the potential to revolutionize the way Mexicans use banking services. Fondeadora ́s team is taking advantage of this attractive opportunity to become a leader in the open digital financial system in Mexico” (LAVCA).

U.S.-China Trade War has created unforeseen benefits for Mexico

The Trump administration’s trade war with China has created unforeseen benefits for Mexico.

President Trump recently upended Fuling Global Inc.: a Chinese maker of plastic utensils that has developed a lucrative business making paper products for U.S. restaurants. Following The Trump administration’s imposition of tariffs on $250B worth of Chinese imports, Fuling Global found an alternative in Mexico: opening a $4 million factory in Monterrey to ship millions of paper straws directly across the U.S. border.

Production is set to begin by July 2019, and if operations prove to be successful, Fuling Global will shift more work to Mexico and potentially start selling to local Mexican market and further expanding into South America.

Mexico has become an increasingly popular location: experiencing recent increase in shipments to the U.S. in categories in which competing Chinese goods were hit with high tariffs.

“In all, U.S. imports of goods from Mexico surged 10% to almost $350 billion last year, the fastest growth in seven years. That helped widen the U.S. trade deficit with Mexico by 15% to more than $80 billion, while the growth in shipments from China slowed by about a third.” (LA Times)

Despite Trump’s promises of reducing the U.S. trade deficit, the American deficit for goods globally reached a $891B high last year, as tas cuts boosted demand for imports and regulatory tariffs impacted U.S. exports.

fDi’s Latin American States of the Future 2018/19

fDi intelligence has released its Latin American States of the 2018/19 report.

“The region surpassed the US$1 billion mark in 2017 and the first half of last year saw it top over US$780 million. Venture capital interest is growing and core geographies like Mexico and Brazil have continued to grow. Colombia (up 36% to US $92 million), Argentina (up 515% to US$38 million), and Chile (up 248% to US $11 million) have all reaped the benefits of growth in investment in 2018. New unicorns have emerged throughout the region” (Nearshore Americas).

São Paulo, Brazil topped the list for FDI attractiveness and strategy. The state took first place for its business friendliness, economic potential, and the highest GDP of all states surveyed.

Buenos Aires, Argentina took second place for its reputation for eagerness, which has attracted significant companies. U.S.-based CloudHesive chose Buenos Aires as the location for new LATAM offices, joining tech giants such as IBM, Google, and Microsoft.

According to Leo Bracco, Executive Director of CloudHesive LATAM,

“Our executive team chose Buenos Aires for our Latin America presence because we see a tremendous amount of potential in this region as well as the eagerness from the technical community in Buenos Aires to be leaders in LATAM and drive innovation” (CloudHesive).

Argentine government plans to co-invest in blockchain projects

The Argentine government announced it has agreed to co-invest in blockchain projects backed by Binance Labs and Latin American crypto exchange LatamEx.

Binance Labs chose the capital city of Buenos Aires as the location for its Latin American hub for season two of the Binance Labs Incubator Program, which kicked off this Monday, March 25.

The country’s Ministry of Production and Labor signed an agreement with Binance with a commitment to match investments of up to $50,000 in each project. The Argentine government plans to fund up to 10 blockchain projects each year over a four-year period.

China Eximbank finances 85% of Latin America’s largest solar plant in Cauchari, Argentina

The Export-Import Bank of China (China Eximbank) is financing 85% of the total $390M cost of Latin America’s largest solar plant in Cauchari, Argentina.

The plant is set to finish this May. Once completed,

“the plant will consist of 1.2 million solar panels and will supply a grid with 300 megawatts of power. It is expected that this will eventually expand to 500 megawatts, which will make it one of the largest solar plants in the world” (LatAm List).

The local Argentine government will front the rest of the cost, covered through a green bond.

According to Guillermo Giralt, technical director of Cauchari Solar,

“Cauchari is in the area with the best solar radiation of the world. We also have good weather conditions and low smog, both good for the project” (Buenos Aires Times).

Cooperation between the two countries was made possible by RenovAr: an Argentine government program which provides electrical energy from renewable sources.

This project reflects the close cooperation between China and Argentina in recent years, as well as a growing trend of Chinese investment in the cross-border solar energy market.

“The Cauchari plant is expected to cut energy costs and reduce carbon dioxide emissions by 325,000 tonnes. As for local impact, the government has agreed to provide indigenous communities with 2% of its annual profits for building on their land. The project will also provide locals with job opportunities at the site, ranging from catering to transportation” (LatAm List).

Mexico’s new restrictions to fight corruption may limit cash payments for real estate

The Mexican government is working on developing new regulations that would cap the amount of cash that can be used to buy real estate.

According to Finance Minister Carlos Urzua, the implementation of these measures would aid in reducing money laundering and corruption within the country.

“President Andres Manuel Lopez Obrador, who took office in December, has made it one of his priorities to draw more people into the formal economy and reduce cash in circulation to cut down on the laundering of proceeds from the drug trade and other illicit activities” (CNBC).

Urzua also mentioned that the government is considering laws that would require all of its payments and collections to be electronically processed.

According to Urzua, the government is also discussing the possibility of establishing an incentive program for Mexican professionals such as doctors, lawyers, and architects to accept electronic payments over cash.

“Nearly 57 percent of people in Mexico work off the books, according to government data. Millions lack bank accounts and an estimated 90 percent of all transactions are done in cash” (CNBC)

What it’s like to open a second office internationally for a growing startup

Heidi Zak shares her experience of hiring an Argentinean remote team with Ladders.

Zak’s four tips about opening offices beyond the main headquarters:

1.“Just like anything you do with a startup, test a remote office in the most lightweight, efficient manner possible”

2.“Include remote offices in the exciting things going on at your headquarters”

3. “When expanding internationally, consider the local work culture and time zone”

4. “Help remote workers understand their impact on the company’s success”

Colombia is the worldwide leader in 2019 stocks

2019’s rally in Colombian equities has earned them a spot at the top of the world’s best performers.

According to Bloomberg, the Colcap index is up 29% in dollar terms in 2019. Despite this year’s progress, Colombia’s benchmarks still remain more than 20% below its 2010 levels.

According to Carlos Enrique Rodriguez, head of equity research at Bogota brokerage Ultraserfinco,

“Some stocks that were ‘excessively discounted’ after a heavy sell-off last year have returned to levels that are much more rational”.

Corporacion Financiera Colombiana S.A. has led the recovery, returning 71% in dollar terms. Meanwhile, the nation’s biggest banking group Grupo Aval Acciones y Valores has enjoyed a 42% return.

“This year’s rally may get more fuel from upcoming changes to pension-fund rules, under which more contributions from younger workers will be channeled into higher-risk funds. This will result in about $370 million per year of extra equities investment per year, according to a study by JPMorgan.” (Bloomberg)

Pepsi LatAm’s appoints new female CEO Paul Santilli

Paula Santilli has been named CEO of PepsiCo’s Latin America operation, a $7.4 billion business.

Following Pepsi Co.’s CEO Indra Nooyi stepping down from her position last year, many expressed concern about the small number of female Fortune 500 CEOs.

According to Fortune, Santilli came up through PepsiCo’s Latin America operation and was most recently president of PepsiCo Mexico Foods, a $4 billion business.

According to Ramón Laguarta, Nooyi’s successor,

“Ms. Santilli brings a deep understanding of our business, the marketplace and our consumers in Latin America, and commercial expertise across both the food and beverage categories… I am absolutely confident she is the ideal leader for this key sector as we work to get closer to our consumers and capture new growth opportunities”

Colombian beauty vlogger Paulia Galindo’s ‘PauTips’ beauty brand’s expansion into new LatAm and U.S. markets

Colombian YouTuber Paula Galindo is one of the predominant influencers in Latin America, with 8.7 million subscribers to her PauTips channel, and 7.4 million followers on Instagram.

Paula’s beauty brand, Paula By Pautips, launched in Colombia last November, with sales exceeding projections by 30%. Although currently only available in Colombia, the brand will be expanding into  other Latin American countries, including Mexico, as well as the U.S., before the year’s end.

Galindo also works with Raze, a Latino digital media company co-founded by actress Sofia Vergara, amidst  a seven-figure funding round.

“Raze, which creates content for platforms like Facebook Watchand works with a slew of YouTube stars throughout Latin America, is currently in pre-production for season two of its hit makeover series hosted by Galindo dubbed Tu Mujer Version… The series, which is distributed on Raze’s YouTube channel, is named after a book Galindo wrote that bears the same title.” (Tube Filter)
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Didi’s Latin American Expansion Invigorates Regional Competition with Uber, Brazilian Pension Reform “Has Markets Feeling Downright Celebratory”, Nubank surpasses 10 million Brazilian Clients, and more….

This week in LatAm: Chinese ride-hailing giant Didi Chuxing launched financial services in Brazil and Mexico, Brazilian markets boomed, and NuBank became Latin America’s biggest fintech company.

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