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April 26, 2019

LATAM Business Weekly - Issue #15

Growing global popularity of Latin music and Apple Music’s new head of U.S. Latin business

Latin music is Apple Music’s fastest-growing genre by number of streams.

In 2018, the Latin music genre accounted for over 69% of total streams within the Apple Music streaming service: outpacing the overall growth in streams of Apple Music (up 57%).

This year, the genre grew by 44%: a greater number of streams over the same period in 2018.

Photo courtesy of Sound Exchange

Uncoincidentally, the genre’s success on the Apple Music platform has been made largely possible by the appointment of Jennifer D'Cunha as head of U.S. Latin business back in October 2017.

The creation of this new position was intended to focus on the genre with an expanded staff, broader marketing efforts and creation of playlists that tap into the market for various subgenres.

In terms of the genre’s recent success, D'Cunha stated,

“Treating Latin music in the U.S. like a business unit. We have the editorial team, label relations, artist relations, business, and we work with people all over the world: Mexico City, Madrid, Rio, São Paulo, Miami. The objective was creating a team that can connect Latin music consumers with the music they love, and making sure we can nurture the artist and label community”

Amazon Web Services announces its cloud computing services will be used to help Chilean Data Observatory

Amazon Web Services has announced that it will help astronomers in Chile crunch data using its cloud computing services. This decision is a symbolically huge step for Amazon as it looks to Latin America for expansion.

Photo courtesy of Astronomy.com

Amazon’s role as a founding member in the public-private research project called Chilean Data Observatory gives the company key entry into the Latin American market where it is seeking to expand.

According to Jeffrey Kratz, General Manager for Public Sector Amazon Web Services (AWS) in Latin American, Caribbean and Canada, Amazon will store data from telescopes in Chile’s Atacama desert and offer researchers the necessary tools to access the data anywhere.

Kratz told Reuters that,

“Chile has over 70 percent of telescopes researching ... the night sky, yet 83 percent of the data they cannot keep because they don’t have the storage capacity at many of these sites”

Chilean Economy Minister Valenté said the project bodes well for the country’s relationship with Amazon.

“This alliance with Amazon shows that Amazon believes in Chile”

Future of green loans in Latin America

Banks operating in Latin America have earmarked potential green loans for corporate borrowers: seeking to advance environmental, social and governance (ESG) criteria.

Only two companies have raised green loans in Latin America.

In April 2018, Spanish utility Iberdrola raised $400m for its Mexican subsidiary. In November, Peruvian conglomerate Ferreycorp signed a $70m loan with BBVA.

“Given that green loans are still in their infancy throughout Latin America, bankers and investors have relied on the region’s best-known corporates to advance a green agenda. These companies come with deeper pockets that easily cover the costs of raising green money and are also constantly scrutinized over their compliance with ESG guidelines.” (Reuters)

According to Jaime García Alba, head of advisory services and blended finance at IDB Invest,

“(Green loans) are not a pure debt instrument, there is an opportunity to combine investment with advisory services,” said García. “There is a value-added expertise and banks know this is something they have to do to deepen their client base.”

Green bonds or loans could attract investors’ attention, welcoming additional transparency that is required with ‘going green’. These transactions must follow strict rules that require borrowers to comply with ESG guidelines.

U.S. Logistics companies enlisting freight brokerage staff in Colombia

One of the best-kept secrets of American logistics is that many freight brokerages have staff in Colombia.

According to Robert Cadena, an ex-broker who runs nearshore services provider Lean Staffing Solutions,

“It started as a cost-savings opportunity, but when you meet the talent – bilingual college graduates – the talent is really great. These guys are intelligent and eager to learn. In Colombia there aren’t a lot of job opportunities.” (Freight Waves)

Cadena’s business, Lean Staffing Solutions, started coming up with the idea of opening satellite office for U.S. logistics companies in Colombia in 2011, and has blown up since. Today, the company manages over 650 employees, accounting for about 70 freight brokerages.

Lean Staffing Solutions is working to solve the problem of the cost of administrative, non-revenue generating positions at third-party logistics providers (3PLs). The company can generate cost savings of 40% on a given position.

Another issue the company is working to solve is the talent problem. In Colombia young ambitious people are eager to learn a new industry and excited to work for an American company and the opportunity of a well-paying job with full benefits. This year, Lean Staffing has a retention rate above 97%.

Walmart Business Failures in Mexico

Supermarket giant Walmart has had great success in Mexico since its arrival in 1991.

“Walmart has stood out as one of the most successful self-service chains in the country, with sustained growth in store expansion and good results in revenue” (The Yucatan Times)

With that being said, certain sectors of Walmart business have not experienced the same success.

1. Pharmacies

First off, independent Walmart pharmacies have failed to gain success in the Mexican market. Diverse financial analysts explained that a main reason for the failure of these pharmacies was due to market fragmentation.

“However, seven years after launching the pilot of the Medimart Pharmacies, in its sales report last year no longer appears any of the 10 units that came to exist.”

2. Banco Walmart

In addition, Banco Walmart, founded in 2007 with the objective of attracting customers who would like to save, has failed in Mexico.

According to data from the National Banking and Securities Commission (CNBV), in 2015, the 130 branches they had were sold to INBURSA after incurring losses of more than 2,800 million pesos over the 7 year period.

“According to an investigation by Signum Research, the profitability levels of Walmart Bank in 2014 were negative and destroyed the value for shareholders of the firm.”

3. Vudu streaming platform


Walmart presented the Vudu platform in Mexico in 2012: a streaming service with prices ranging from $20 to $200 pesos.

“Its differentiator to Netflix was to provide higher resolution, a catalog with 3,800 titles and 270,000 users. By 2015 most users were gone so the service was withdrawn. Walmart recently reported that Vudu would focus on extending its services, but only in the United States.”

4. Mobile Virtual Operator (MVNO)

When Enrique Ostalé took over the management of WALMEX in 2015, he opened the possibility for Walmart to enter the Mobile Virtual Operator (MVNO) business; but the business never actually started officially.

According to experts from The Competitive Intelligence Unit (CIU) and Mediatelecom Policy & Law,

“The challenge of entering this business is to connect the sale of groceries with the mobile phone service, which requires planning that is often undermined by ambitious goals”.

Colombian startup Leal raises $3m

Colombian startup Leal has raised $3m from FCP Ventures and an anonymous contributor.

Leal provides a network of loyalty programs with more than one million users linked to more than 450 brands.

Through the Leal platform, users gain points in exchange for prizes and benefits, while the platform provides partnered brands with data to help improve consumer interactions and increase sales.

"Their platform has 15 categories including restaurants, gas stations, and retail. In Colombia, Leal is available in 175 municipalities and has received over 16K new clients in the last 30 days.” (Lat Am List)

Leal plans to use this new capital to expand into Panama, Guatemala, El Salvador, and Mexico.

AMLO’s Mexican economy updates: “no need to be terrified”

Mexican President Andrés Manuel Lopez Obrador, better known as AMLO, has previously created fears among Mexican investors.

One Mexican money manager (who has chosen to remain anonymous), said in a statement that he has “never seen so many rich Mexicans taking money out of the country and parking it in the U.S.” (Forbes)

Photo courtesy of Reuters

Since he took over in December, the President has canceled a new and much-needed Mexico City airport based on concerns that contracts were “crony capitalism and those days are over".

“Some members of his party, the National Regeneration Movement, said AMLO would tax or ban certain bank fees. During his campaign he said he would review the previous president's policy to open offshore oil drilling to foreigners, a business once solely in the hands of Pemex, an oil company barely firing on all four cylinders. As everyone knows, the market hated all of these things.”

With that being said, Obrador is still by far the most popular president in all of the Americas and the Mexican currency has proved

Additionally, the U.S. Federal Reserve is on pause with rate hikes: a large factor in the current strength of the Mexican peso.

The iShares MSCI Mexico (EWW) exchange-traded fund is up 12.5% this year, just barely underperforming the iShares MSCI Emerging Markets (EEM) index.

Meanwhile, the dollar is down 3.56% against the peso this year, compared to gaining more than 1% against the Brazilian real.

Video: How Mexico’s New Leftist President Has Navigated Corruption, Inequality and Trump

This video by Democracy Now discusses AMLO, corruption, and what's next for Mexico.

As President Trump continues his threats to close the U.S.-Mexico border to stop the flow of asylum seekers, we look at the response from Mexican President Andrés Manuel López Obrador and the first four months of his presidency.

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