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April 12, 2019

LATAM Business Weekly - Issue #13

SoftBank tapped industry veterans from Third Point and JPMorgan Chase & Co. to oversee $5 billion SoftBank Innovation Fund focused on LatAm

SoftBank Group Corp. tapped industry vets from Dan Loeb’s Third Point and JPMorgan Chase & Co. that will help oversee the $5 billion SoftBank Innovation Fund focused on Latin America.

Paulo Passoni, former managing director at Daniel Loeb’s hedge fund Third Point, will serve as investment partner with SoftBank executive Shu Nyatta.

Softbank has also announced that André Maciel, who ran JPMorgan’s investment-banking advisory business for Brazil, will join Softbank as a managing partner who will lead the fund’s office in Brazil.

According to Softbank Chief Operating Officer Marcelo Claure, the fund’s main focus is on e-commerce, digital financial services, health care, mobility and insurance.

Claure said in a statement that

“There’s never been a better time to support Latin America and the companies that will help shape its future…We are delighted to welcome this talented team with deep investment and operational experience in the region.” (Bloomberg)

China's Belt and Road initiative and expansion into Panama creating anxieties for U.S.

China's Belt and Road initiative and subsequent expansion into Latin America is creating anxieties for the U.S.

Chinese President Xi Jinping's foreign initiative: Belt and Road, which began in the 1990s, has been building railways, ports, power plants and other projects in various countries. The initiative has created multibillion dollar deals for loans and investments in oil and mining in South America.

The initiative seeks to build ports and trade-related facilities, now focusing on Central American countries like Panama.


The Panama canal is strategically important to both China and the United States: linking the Atlantic and Pacific oceans, thus making it one of the busiest trade arteries in the world.

While Panama's leaders see China as a beneficial source of trade and investment, avoiding conflict with U.S. remains to be of utmost importance.

Panamanian President Juan Carlos Varela stressed that Panama's relationship with China "will not affect relations with our strategic partner."

U.S. Secretary of State Mike Pompeo told reporters that Panama should “keep its eyes wide open" regarding Chinese investment.

At the Group of 20 meeting of major economies in Argentina in December, Pompeo stated that such projects are not always driven by “ good intentions”

"We are all concerned about China and by the way that China is entering those countries” (U.S. News)

Video: China’s trillion dollar plan to dominate global trade

https://www.youtube.com/watch?v=EvXROXiIpvQ

Cuban newspapers cutting back in response to paper currency shortages

A paper currency shortage is now forcing at least six state-run Cuban newspapers to cut back on pages and frequency of circulation.

Cuba has been suffering frequent and long-lasting shortages, all blamed on a shortage of hard currency. The island has been plagued with shortages of basic products such as flour, cooking oil, chicken and eggs.

While the Cuban government has recently allowed increased access to the internet, the majority of Cubans still receive news primarily from print newspapers broadcast media.

Cuba has previously imported newsprint from China in recent years, but the cash flow problem has forced cutbacks in a vast range of imported products.

“Cuban Communist Party organ and several other papers are cutting back from 16 to eight pages on Wednesdays and Fridays. The changes take effect Friday. The newspaper of the Communist Youth League, Juventud Rebelde, will stop publishing on Saturdays” (Washington Post)

The newspaper the Communist Youth League, Juventud Rebelde, will stop publishing on Saturdays.

Central American ecotourism industry

Central American nations are increasingly becoming ecotourism hotspots for consumers around the world.

According to the Sustainable Travel Report released by Booking.com,

“87 percent of global travelers want to travel sustainably, minimizing their environmental impact and visiting new nations whilst respecting local cultures and benefiting both the conservation of the planet and the local people that live there”

The most obvious opportunity for growth in Central American ecotourism is through government support. The Central American Council of Tourism board comes together for an annual meeting, with many nations coming together  “to discuss the facilitation and promotion of tourism development” throughout the region”. (Equities)

The leader of Central America’s sustainable tourism industry is Costa Rica, as the only tropical country in the world that has reversed its deforestation.

“The country powered itself on 100% renewable energy for 299 days straight in 2018 thanks to its strong government policies and innovations in the green energy sector, and it’s those leadership qualities and environmental policies that are contributing to the growth in eco-tourism in the region”

In addition, local Costa Ricans’ attitudes towards the environment are extremely positive: which has a significant impact on recycling and sustainable living. In addition,  99% of the country’s electricity production is from clean sources.

Google and Cuba’s “peering agreement” works to improve the nation’s internet infrastructure

Last Thursday, Alphabet Inc’s Google signed a deal with Cuban telecommunications group ETECSA in efforts of working towards improving the nation’s internet infrastructure.

Both parties signed a memorandum of understanding to begin negotiations of a so-called  “peering agreement that would create a cost-free and direct connection between their two networks” (Reuters).

Google and ETECSA would directly share their networks in an effort to provide faster online connection and better coverage.

Instead of paying for an intermediary, Cuba will now  be automatically directed to Google’s nearest points of presence in Southern Florida, Mexico and Colombia.

97% of the world’s access to the internet is through an underwater network of fiber-optic cables but due to Cold War rivalries, the nation has been previously denied of purchasing telecommunications equipment from the United States, one of the global leaders in IT.

In 2013, the Cuban government paid roughly USD $70 million to connect a 994 mile-long conduit to Venezuela.


“Officials have also hindered internet expansion to keep ‘digital dissidence’ at a minimum. Cuban users who are critical of the regime have faced harassment and even arrest based on their internet activity.” (Contxto)

Latin American digital ad spending forecast

According to a new report by eMarketer, digital ad spending in Latin America is expected to grow 14.1% in Latin America in 2019: with advertisers spending $9.17 billion in the region this year.

“Digital platforms will take in nearly one-third of all media spending in Latin America, the analysts predict” (Billboard)

The study found that display advertising driven primarily by video and social media is expected to account for more than 57% of total digital ad spending this year in Latin America, while search accounts for 37.1% and 5.5% for classifieds.

In addition, eMarketer reports that this year, mobile’s share of digital ad spending will account for 62.7% of digital investments.

“Continued investment in digital infrastructure, improved mobile internet access, less-expensive data plans and rapid smartphone adoption have impacted mobile advertising growth throughout Latin America”

Latin America’s decade long hangover

For Latin America, the 2010s may be remembered as “The Hangover”: a painful transition in which the region has struggled to recover from unrealistic expectations of the previous decade.

Even at lower economic growth than predicted this decade, this growth will still be better than the 1.8% expansion the region averaged from 1983 to 2000.


With that being said, many gains from the previous boom remain intact. Poverty in this region has remained stable at 30% (down from 45% in 2002).

According to Michael Reid, editor for The Economist,

“part of the challenge will be learning lessons from the disappointments of the 2010s without getting too discouraged by them. “It’s always easy and safer to be negative about Latin America” (Americas Quarterly).

U.S. Hispanic Chamber of Commerce 2019 Legislative Summit

Latino business owners and entrepreneurs gathered in Washington D.C. last Wednesday for the U.S. Hispanic Chamber of Commerce 2019 Legislative Summit.

Latino-owned businesses are a fast-growing sector of the U.S. economy,  contributing more than $700 billion annually. However, ongoing obstacles face Latino business,  including lack of access to capital and reliable lenders.

Attendees at the summit sought reassurances that trade at the U.S.-Mexico border will continue, and discussed answers to problems regarding access to capital for Latino-owned business.

An annual study of Latino businesses by the Stanford University Graduate School of Business found that

“a greater number of Hispanic-owned businesses take on more personal financial risk compared to businesses owned by white, Asian Americans, and African Americans, and that a lower percentage of these Hispanic firms are able to secure bank loans from traditional sources compared to other groups” (NBC News)
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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.

Goldman Sachs looks to capitalize on new opportunities in Latin American fintech, Finance Chief’s Resignation Deepens Doubts in Mexico, and more from Latin America

Other stories this week include: Brazilian health-tech Feegow Clinic raises R$20 million, FOMO’s underlying role in last week’s EU-Mercosur Agreement, and Brazilian Startups’ Preference for New York over São Paolo for IPOs

Uber partners with BBVA and Mastercard to offer debit card to local drivers, Latin American VC Funding Trends, Grow Mobility hits 10 million ride milestone, EU-Mercosur Treaty, and more from the region...

Featured stories include: the top four big trends in Latin American startup funding, Grow Mobility’s growing success, EU-Mercosur Treaty: deal details and its international implications for Latin America.

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