The Economist - USA (2022-01-15)

28 TheAmericas TheEconomistJanuary15th 2022

creditforsmall­andmedium­sizedenter­

prisesismorethan$650bninBraziland

$160bninMexico.

ThemostsuccessfulfintechisNubank,

aBrazilian startup which listedin New

YorkinDecember.Withalmost50musers,

ithasbecometheworld’sbiggestdigital

bank, valued atover $40bn. Others are

catchingup.Creditjusto,a Mexicanlender,

hasdisbursedsome$600mtobusinesses

since 2015 andrecentlyboughta conven­

tionalbanktoexpanditslendingcapacity.

Another Mexicanstartup,Konfio, be­

camea unicorninSeptember.Itusescred­

it­ratingalgorithmsbasedonbigdatato

giveoutloanstosmallbusinessesmore

cheaplythanregularbanks.PierpaoloBar­

bieri,thefounderofUalá,anArgentinefin­

tech valued at $2.5bn,claims thattwo­

thirdsofitscustomershadnocredithisto­

rybeforedownloadingitsapp.

LatinAmericanfintechreceived40%of

venturefundingin2020.Ithelpsthatin

severalcountries,covid­19stimulusmon­

eywasdisburseddigitally.Thismeantthat

an estimated 40m unbanked people

signedupfor traditionalanddigital ac­

countsinBrazil,ColombiaandArgentina.

Otherbusinesses,suchashealthcare,

educationandinfrastructure,arealsoripe

fordisruption.Mostofthesesectorsare

dominatedbya fewfirmsthatbehavelike

“clubs”, says Cristóbal Undurraga, who

usedtodirectInnovaChile,a government­

backedaccelerator.Forexample,arounda

thirdofLatinAmericansare uninsured,

largelybecausepremiumsarehigh.“In­

suranceiswherefintechwasseveralyears

ago,” says Ana Cristina Gadala­Maria of

qed, anAmericanvcfirm.

Innovationisfizzinginallsortsofar­

eas.NotCo,a Chileanunicornthatproduc­

esplant­basedfoods,hasdevelopedanal­

gorithmthatidentifiesfruitsandvegeta­

bleswiththemostsimilarmolecularcom­

positiontoanimal­basedproducts.During

thepandemicmanymillennialswentto

livewiththeirparentsandnudgedthem

outoftheirmeatycomfortzone,thinks

MatíasMuchnick,itsceo. JeffBezos,the

founderofAmazon,hasinvestedinit,his

firstventureinSouthAmerica.

Themainactioninthestartupcrazeis

inArgentina,BrazilandMexico,butsome

smallereconomieshaveseendrama,too.

Uruguay hasbecome oneoftheworld's

biggestexportersofsoftware,perperson.

TheidbthinksPeruandGuatemalaalso

havea lotofpotential.

Challengesremain.Crucialskillsarein

shortsupply.LatinAmericanuniversities

trainaround40,000softwaredevelopersa

year.Thatisfarfewerthanthe100,000that

GeneralAtlantic,anAmericanprivate­equ­

ityfirm,estimatesthetechsectorneeds

annually.Internetprovisionispatchyand

pricey(seechart2).Argentina,witha pop­

ulationof45m, hasonly 30,000square

metresofdata­centrespaceinoperation—

thesameasAustin,Texas,whichhasjust

2minhabitants.

Political uncertainty does not help.

Chile,whichhasoneofthehighestnum­

bersofstartupsperpersonintheregion,

recentlyelectedGabriel Boric,a35­year­

oldpresidentwithtiestotheCommunist

Party.Manyleft­wingersarealsoinvolved

inthedraftingofa newChileanconstitu­

tion.CristóbalSilva,theco­founderofFen

Ventures,anearly­stagevcfund,thinksit

couldbecometrickiertoinvestthere.

Andrés Manuel López Obrador, the

presidentofMexico,hasmadelifehardfor

manyprivatefirms.Digitalinvestorsare

unlikelytobeimmune.Thepresidentap­

pearssomewhatoutofdate.Whentalking

aboutvideogames,herefersto“theNin­

tendo”,asifthemarketwerestilldomin­

atedbyonecompany,asinthe1980s.

Somegovernmentshavetriedtomake

lifeeasierforstartups.In 2020 Brazil’scen­

tralbankintroduceda seriesofrulestofos­

ter transparencyand competition in fi­

nance.Customerscannowcompareser­

vices and transfer more easily between

providers.ItalsolaunchedPix,aninstant

paymentsystem.Colombia’sgovernment

hasalsomadeiteasierforfintechstoget

going without meetingthe full require­

mentsofa financial­servicelicence.

A Mexicanlawin 2018 purportedtosim­

plifytherulesforfintech.However,itis

confusing,saysLeilaSearchoftheInterna­

tional Finance Corporation, the private

lendingarmoftheWorldBank.Sheesti­

matesthatittakesa yearandhalfforfin­

techstostartoperatinginMexico.

Manyinvestorsseemundeterred.Soft­

Bank, aJapaneseconglomerate,recently

announcedthatit willinvestanother$3bn

inLatinAmerica,ontopofa regionalfund

itfoundedin 2019 worth$5bn. Marcelo

Claure,thefirm’sBolivian­bornchiefoper­

atingofficer,hassaidheexpectsatleast

eightLatinAmericanfirms,backedbySoft­

Bank,tolistpubliclythisyear.Tencent,a

Chinesetechgiant,recentlyco­leda fund­

ingroundforUalá.

HernánKazah,oneofthefoundersof

MercadoLibre, doubts that political up­

heavalwillhurtstartupsmuch.Henotes

thatMercadoLibresurvivedthemeltdown

ofArgentina’seconomyin 2001 andthe

Brazilianrecessionof2014­16.Ithelpsthat

thecompanyislegallydomiciledinDela­

ware.Indeed,ofthe11 Argentinetechcom­

panieswithbillion­dollarvaluations,ten

areincorporatedabroad.

Many uncertaintiesremain,notleast

overinflation.Butthereisa hungerforin­

novation in the region. Lots of people

shoppedonlineforthefirsttimeduring

lockdowns. Others signed up for small

loans.Forgoodaswellasill,thepandemic

willleaveitsmarkonLatinAmerica.n

Runningupthathill

LatinAmerica,venturecapital

Source:CBInsights

1

20

16

12

8

4

0

1,000

800

600

400

00

0

2120191817162015

Deals Investment,$bn

Cloudbusting

Broadband subscriptions per 100 people

2020

Source:ITU

2

Sub-SaharanAfrica

South Asia

Middle East &

north Africa

Latin America &

the Caribbean

East Asia & Pacific

Europe &

Central Asia

3020100

35

8.5

21

32

27

2   

Average price,

$ per month

Brazil

Jair and balanced

A

s the omicron variant  sweeps  the

globe,  scientists  cannot  accurately

track  its  impact  in  Brazil.  In  early  Decem­

ber  the  government’s  main  system  for

counting cases and deaths was hacked in a

ransomware attack. Since then, the site has

been  down.  On  January  7th  more  than

63,000  cases  were  registered  in  24  hours,

the  most  since  September.  The  actual

number  is  probably  higher.  Yet  the  health

minister  shrugged  off  concerns  about  the

lack of statistics as “narratives”.

All this is part of an unprecedented de­

cline  in  data  collection,  claims  Paulo  Jan­

nuzzi, a professor at the National School of

Statistical Sciences in Rio de Janeiro. This

is partly because under Jair Bolsonaro, the

president  elected  in  2018,  data­collecting

institutions have taken a battering. 

Six months after taking office Mr Bolso­

naro called a spike in deforestation in the

S ÃO PAULO

Brazil’s president scorns accurate data