Latin America’s gold e-rush

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By: John Paul Rathbone

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Print this page0 In a seemingly parallel universe — far from Venezuela’s unfolding tragedy, Argentina’s recession, or Brazil’s and Mexico’s controversial new presidents — e-business is booming in Latin America. In fact, it has been a banner, multibillion-dollar week for Latin American business generally.

Mercado Libre, the Argentina-based e-commerce retailer, raised $1.9bn in a share placement and a direct investment from PayPal. SoftBank, the freewheeling conglomerate best-known for its $100bn Vision Fund, meanwhile said it was setting up a $5bn Latin America tech fund. For outside investors, the region is increasingly no longer a story about commodities only. Just ask China: it has invested more than $100bn in the region since 2005, with most of the deal-flow now into sectors such as tech, communications, alternative energy and finance.

Why the sudden rush into tech? Well, for one thing, it’s not so sudden. Music-streaming service Spotify cut its teeth in Latin America — in fact, it is the only emerging market where its model worked meaningfully. WhatsApp use is ubiquitous across the region. Brazil is Uber’s largest market outside the US, and Facebook’s third-largest market worldwide.

“There’s a sense that Latin America is at a tipping point in terms of e-commerce growth,” Sean Summers, Mercado Libre’s chief marketing officer, said of the share placement. SoftBank feels the same. “There is so much innovation and disruption taking place in the region, and I believe the business opportunities have never been stronger,” said Marcelo Claure, the former Sprint turnround executive who will lead the SoftBank fund.

Such boosterish talk always accompanies megadeals. This time it may even be true. Technological change is accelerating, as it is everywhere. Brazilian cosmetics company Natura, for example, now organises its sales reps using Uber-style apps. I’ve heard more than one Venezuelan refugee give thanks for Waze and ride-hailing apps as they help them start new lives in new countries. As this change accelerates, so does deal-flow.

To cite just three recent examples, Colombian last-mile delivery company Rappi has raised funds from investors including Sequoia Capital; Brazilian fintech Nubank raised $180m from China’s Tencent; and Walmart, in its first Latin American acquisition, recently acquired Mexican delivery start-up Cornershop for $225m.

However, SoftBank, which is not known for being either soft or slow, has bigger sums to spend. That potentially makes it less agile. Latin America also still has relatively few attractive companies operating across multiple countries to invest in. Novam Portam, the Asia-Latin American consultancy, even wonders: “Will SoftBank have the patience to do the diligence required? Or will the headline $5bn not get put to work?”