Mexico's America Movil to Focus on Bringing 5G to Latin America in 2020, Mexico to Tax Digital Services from Other Countries with New VAT Law, SoftBank Plans to Invest $1 Billion From Latin America Fund and More….
Other featured stories include: AMLO’s Latest Plan to Regain Investor Confidence Is Almost Ready, Walmart’s Mexico Unit Blames Government Cash Aid as Revenue Rise Slowest in Three Quarters, BAML Survey: More than 50% of LatAm Fund Managers Cite China Slowdown as Major Risk, Belvo: A YC-Backed Startup Building Financial API for Latin America, and Carrefour to Buy 30 Stores in Brazil From Rival Makro.
Mexico's America Movil to Focus on Bringing 5G to Latin America in 2020
Last Wednesday, America Movil discussed plans to roll out 5G technology in Latin America.
America Movil shares rose as much as 6% to $16.72 MXN, the highest since July 2018. In addition, the company reported a 63% increase in fourth-quarter net profit, helped by reduced costs and strong gains in postpaid customers.
On a call with analysts, Chief Executive Daniel Hajj said that for 2020, America Movil will focus on rolling out 5G technology in Latin America. The technology will likely debut in Mexico this year and may arrive in Brazil as well, depending on the availability of spectrum, Hajj added (The New York Times).
“We just launched in Austria our 5G network…. and we’re going to do that all around Latin America in the second half of the year,” Hajj said.
America Movil expects capital expenditures of $8.5 billion for the year, on par with last year’s, Hajj stated. The investment will be focused on deploying fiber in Mexico, Colombia, Brazil and other markets.
Hajj also expressed his optimistic outlook about the prospects of America Movil’s U.S. subsidiary, TracFone, as T-Mobile US Inc.‘s takeover of Sprint Corp advances. A federal judge approved the deal on Tuesday.
“It’s good for TracFone - it’s good to have all of this consolidation in the market,” Hajj said.
Mexico to Tax Digital Services from Other Countries with New VAT Law
Last week, Mexico passed a law that taxes digital services from other countries, according to a report.
Starting on June 1 of this year, a 16% value-added tax (VAT) will be tacked onto digital services. The law will apply to all services, even B2B transactions and will cover all online applications, including video, audio streaming, images, education and others.
As reported by Pymnts.com, there are stipulations for what constitutes a Mexican recipient to determine eligibility for the tax. The person must be a resident of Mexico, and payment must be made through an intermediary. In addition, the telephone number of the service provider must have Mexico’s country code and the IP address must correspond to the country.
Providers will have to register for VAT in Mexico and get a tax identification number, and are required to appoint a legal representative in Mexico for notification purposes and must register in the month of June.
SoftBank Plans to Invest $1 Billion From Latin America Fund
SoftBank Group Corp. will continue to invest in Latin America this year, focusing on industries including e-commerce, health care and fintech.
Photo Courtesy of Axios
As part of its $5 billion Latin America Fund launched in Q1 2019, the group plans to invest $1 billion in 2020, adding to last year’s $1.6 billion. Thus far, its poured $100 - $150 million into each of 17 companies and two venture capital firms so far, although the playing field is bigger. As reported by Bloomberg, SoftBank has its sights on roughly 650 firms in the region.
“We are focused on investing in companies that could achieve long-term profitability,” Andres Freire, a managing partner and head of SoftBank’s Southern Cone region, said during a roundtable with reporters in Buenos Aires. Countries such as Argentina, Brazil, Chile, Colombia and Mexico are in the spotlight, and Freire said there’s no preset amount by nation (Bloomberg).
SoftBank’s investments include Colombia-based delivery startup Rappi, Brazil fitness company Gympass and Argentine fintech Uala. The firm’s expansion in Latin America is also looking at startups that apply artificial-intelligence to food-related businesses, especially those focused on plant-based food.
Softbank is “paying special attention” to two companies from Brazil, one from Peru and one from Chile, Freire added.
In addition to the investments, SoftBank plans to launch an 11-week program with the Correlation One foundation to train and potentially hire future AI experts, Fierre said. The firm will continue to invest directly in venture capital firms, after taking a $130 million stake in Kaszek Ventures and making a $100 million investment in Valor Capital Group in 2019.
AMLO’s Latest Plan to Regain Investor Confidence Is Almost Ready
Mexican President Andres Manuel Lopez Obrador’s latest plan to regain investor confidence will be ready to be presented to the public by the end of the month, his chief of staff said.
Alfonso Romo said that while negotiations are ongoing, the Energy Ministry is evaluating $100 billion of projects presented by the private sector to evaluate which projects can best fit the national development plan.
“This energy plan is going to be key, very important, to gain the confidence of a sector that we’ve been in disputes with in recent months,” Romo said at a conference in Mexico City on Thursday.
As reported by Bloomberg, companies would like to see a return to oil-field auctions, which brought in billions of dollars in foreign investment. The auctions, started under AMLO’s predecessor Enrique Peño Nieto, were stopped by Lopez Obrador when he took office in December 2018.
Initially, these energy projects were supposed to be presented as part of a larger package which was announced in November, but were pulled at the last minute. This larger plan was unveiled in November, and accounts for $869 MXN ($46 billion USD) worth of infrastructure projects such as roads, rail, ports, airports, and telecommunications.
Walmart's Mexico Unit Blames Government Cash Aid as Revenue Rise Slowest in Three Quarters
On Thursday, Walmart de Mexico - the country’s biggest retailer - reported its slowest revenue growth in three quarters, with its core supermarket chain hit by competition after the government altered a welfare spending program.
Walmex (as the unit of Walmart Inc. is known locally) said revenue rose 4.7% in the fourth quarter of 2019, its slowest since a growth of 4.6% in the year’s first quarter.
Walmex’s warehouse-style supermarkets (referred to as Walmex Bodega) comprise of nearly 80% of the retailer’s stores in Mexico, the largest foreign market by store count for Walmart Inc.
President Andres Manuel Lopez Obrador’s government distributed supermarket vouchers, which were previously designed to be spent at chains like Walmex Bodega. But ahead of the fourth quarter, the Mexican government allowed the vouchers to be converted into cash, opening up possibilities for them to be spent at corner stores, street vendors and outdoor marketplaces.
“Among our formats, Bodega suffered the greatest impact from the change in disbursement of government support programs, especially in the center and metro regions,” said Guilherme Loureiro, Walmex’s Chief Executive, on a webcast following the release of the quarterly earnings (Yahoo Finance).
Walmex said the fourth quarter’s revenue rise was driven by solid same-store sales in Mexico as well as Central America. The company also said online sales in the quarter grew 47%, with e-commerce representing 2% of total Mexico sales.
As reported by Yahoo Finance,
“Quarterly net profit dropped 4.5% to 11.2 billion pesos ($602.31 million), after an intellectual property royalty payment to parent company Walmart in November of 1.1 billion pesos.”
Overall for the year, Walmart de Mexico said net profit rose 5.9%, citing better productivity and cost controls despite a macroeconomic environment.
“We’re facing a soft-growth environment and more challenging competition,” Olga Gonzalez, the company’s chief financial officer, said in the webcast (Yahoo Finance).
BAML Survey: More than 50% of LatAm Fund Managers Cite China Slowdown as Major Risk
A Bank of America Merrill Lynch (BAML) survey showed on Tuesday that slowing economic growth and commodities demand in China is the biggest single worry among Latin American fund managers, who are now holding the largest cash position in their portfolios in the past two years.
The Bank of America Merrill lynch survey of 52 fund managers with approximately $103 billion of assets under management was carried out from Feb. 6 to Feb. 13.
As reported by Reuters,
“Roughly 56% of those surveyed cited this as their No. 1 overseas risk for Latin American markets, up from 12% last month and far ahead of U.S. elections (15%) and a strong U.S. dollar (just over 10%). Reflecting the greater degree of risk aversion, their average cash position shot up to 5.2% from under 3.0% in January, the highest since BAML began the Latin American fund manager survey two years ago, the bank said.”
For Brazil, almost half of the fund managers said they would be disappointed if economic growth this year fails to reach 2.0%, while 90% of the group said they would be disappointed if it doesn’t reach 1.5%.Reuters reports that several banks have recently downgraded their 2020 growth forecasts toward the 2.0% mark.
Among the survey’s other notable findings, 60% see the economic situation in Argentina deteriorating in the next six months, up from 55% last month, while 27% think the same about Chile, up from only 8% in January.
According to Reuters, more than a fifth of those surveyed now expect the Mexican peso to outperform over the coming six months, up from 4% last month, BAML said.
Belvo: A YC-Backed Startup Building Financial API for Latin America
While companies in the broad fintech and finservices spaces were already attractive bets for private investors, Visa made them all the more attractive — a facet of the market that we presume has a great impact on startups that are working along similar lines to Plaid.
Startups like Belvo, a Y Combinator-backed company that is part of the accelerator’s current, Winter 2020 batch.
“Noting that his company’s aims are ‘similar to the overarching goal[s] of Plaid,’ Belvo co-founder Pablo Viguera told TechCrunch that Belvo is not merely building a banking API business hoping to connect apps to financial accounts. Instead, Belvo wants to build a finance API, which takes in more information than is normally collected by such systems. Why take in more data from more sources? Because, Viguera said, only 50% of individuals at most have a bank account in Latin America, his company’s target market.”
Viguera also noted that some gig-economy companies in Latin America are issuing their own cards that allow workers to cash out at small local shops. In time, all those transactions are data that could be linked up using Belvo. The company’s work to connect banks and non-banks together is key to the company’s goal of allowing “any fintech or any developer to access and interpret user financial data,” he said.
While Belvo is similar to Plaid, it is tuned for the Latin American market, and can take in a more diversified set of data to better meet the local market’s needs. Similar to other players in the API-space, Belvo charges for each API call that its customers use.
The company is primarily focused on the Mexican market. According to Belvo, Mexico is home to a host of fintech companies it can partner with — 450 to 500 by Viguera’s estimation — with more being founded each quarter.
As reported by TechCrunch, Belvo will move into the Colombian and Brazilian markets this year.
Carrefour to Buy 30 Stores in Brazil From Rival Makro
The Brazilian unit of France’s Carrefour SA has agreed to buy 30 stores from rival retailer Makro’s Brazilian subsidiary for 1.95 billion reais ($453.69 million USD), the French retailer said in a securities filing on Sunday.
As reported by The New York Times, Makro will continue to operate in Brazil but with only 24 stores in the country’s richest state, São Paulo. Makro, whose Latin American stores are owned by Netherlands-based SHV Holdings, didn’t disclose a transaction price.
In a securities filing last week, Carrefour confirmed talks to acquire the stores but denied Brazilian media reports it would acquire all of Makro’s Brazilian operations.