The end of 2017 signaled Latin America’s return to a growing economy. Latin American GDP grew 2% annually in Q4 of 2017.[1] Before 2017, the region had five years of deceleration and one of recession.[2] Recently, Latin America has struggled with recession, a politically sensitive climate, and high inflation, but it is now on an upward swing. Latin American entrepreneurs are generating creative new business models to address business gaps in their regions. Strong business ideas paired with a strong economic climate are fueling exciting change.
Argentina and Brazil play a dominant role in Latin America’s economy and stability. This comes as no surprise: The two countries account for more than half of South America’s total economic value.[3] While Argentina and Brazil suffered from recent economic downturns, they are currently rebounding and steadily creating value for the region. Brazil, the largest economy in Latin America, has the eighth largest gross domestic product (GDP) in the world and contributes 38.5% to the region’s GDP.[4] Brazil has a pivotal election coming up in October. A pro-reform candidate has the potential to increase private investment and promote market friendly policies.[5] This could give the country even more potential for growth.[6] FocusEcomics panelists predict that Argentina’s economy will grow 2.6% in 2018 and 3.2% in 2019.[7] In the second quarter of 2017, after almost two years of negative growth, Argentina had a GDP growth of 2.7%.[8]
Business growth has played a significant role in the region. In recent years, Argentina and Brazil have both been home to many startups. Mauricio Macri, Argentina’s president since 2015, created legislation that enables people to create and invest in companies more easily.[9] In addition, Brazil’s tech industry is thriving despite the recent economic downturn. For example, Brazil’s e-commerce segment has grown 20% year over year even as its GDP stayed flat. In fact, Brazil is the fifth largest internet and mobile economy in the world.[10] In addition, Brazil is a top five market for Facebook, Google and Twitter based on the number of users.[11]These statistics are staggering considering that in 2015, only half of Brazil’s population was online.[12]
One of the best-known technology companies in Latin America is e-commerce company MercadoLibre. Headquartered in Buenos Aires, Argentina, the online marketplace operator has often been called the Amazon of Latin America. MercadoLibre is available in 18 countries and had 211.9 million registered users at the end of 2017.[13] It has been publicly-traded on Nasdaq since 2007, and is currently in the Nasdaq-100 Index.[14] The Nasdaq-100 index is comprised of the largest domestic and international non-financial companies listed on the Nasdaq Stock Market based on market capitalization. The number of payment transactions on MercadoLibre increased year-over-year, as reported in their fourth quarter 2017 earnings results.[15]
MercadoLibre is focused on promoting financial inclusion in Latin America.[16] In January 2017, MercadoLibre launched Mercado Crédito—a credit platform that offers working capital loans to qualified small and medium sized enterprises that sell through MercadoLibre. MercadoLibre’s credit system has allowed sellers to be more productive.
According to Pedro Arnt, EVP and Chief Financial Officer at MercadoLibre.com,“Two thirds of these sellers use the credit to buy new goods and increase sales in our marketplace, and 7 out of 10 take a second loan. What’s more: 80% of them are not in the traditional financial system, so they do not have access to traditional means of credit. Our intention is to promote financial inclusion.”
In a recent interview at the Nasdaq MarketSite in Times Square, former MercadoLibre CFO Nicolas Szekasy described the strength in Latin America. Szekasy is now Co-founder and Managing Partner at Kaszek Ventures, a venture capital firm focused on technology companies in Latin America.
“We were seeing very positive trends in technology and great entrepreneurs in the region, but scarcity of value-added capital,” says Szekasy when discussing why he and co-founder Hernan Kazah left their C-level posts at MecadoLibre to launch their VC firm to help entrepreneurs grow their businesses.
In the last seven years since Kaszek Venture’s launch, the company has evaluated more than 7,000 companies and invested in approximately 50 of them. In 2017, they raised they raised $200 million for their third fund, Kaszek Ventures Three.
Kaszek Ventures has offices in Buenos Aires, Argentina, and Sao Paulo, Brazil, and the firm continues to play a key part in the growth of the Latin American tech ecosystem.[17]“We look at opportunities throughout Latin America,” Szekasy says of the firm’s investments. “Part of our DNA as MercadoLibre operators is that we built a regional platform where the company was the leader in every country in which it operated. So now we are very open to investing anywhere in the region, and we end up allocating capital where we see the highest quality deals. For our Fund One and Fund Two we deployed two-thirds of the capital in Brazil where we were seeing opportunities with more potential. But based on how well other ecosystems have evolved, we are sure that with Fund Three and also over the future with the coming funds, we will be investing more in Mexico, Argentina and Colombia, and some of the other countries in the region.”
Latin America remains fertile ground for innovative companies. In 2013, Wharton profiled four successful entrepreneurs in Latin America. All four entrepreneurs agreed that there is more opportunity in Latin America now because of the wide range of opportunities to leverage effective low-cost electronic technology. Entrepreneurs in Latin America are creating their own innovative ideas, and not simply adopting existing ideas.[18] For example, MercadoLibre realized the unfulfilled ecommerce market in Latin America and created a solution. The global demand for innovation is not slowing down and Latin America is leading the challenge.
At companies like MercadoLibre, the entrepreneurial spirit has been present from the start. Their defined focus is to foster, promote and facilitate entrepreneurship throughout Latin America.[19]And so believes MercadoLibre’s CFO, Pedro Arnt, noting“Entrepreneurs can be true agents of change. That is why we promote projects that generate positive impact throughout our enhanced marketplace, providing opportunities through training, financial inclusion and the promotion of triple impact entrepreneurs. We’ve invested since 2013 3.6 Million USD in 24 Latin American companies through our Meli Corporate Venture Fund.”
Nasdaq continues to be home to the world’s premiere high-tech companies and growth companies, including innovative Latin America-based companies across a variety of industries that have chosen to list on Nasdaq. Also, numerous companies in the region are members of Nasdaq’s International Designation, which offers visibility to international companies that are Level 1 ADRs that trade on the over-the-counter market. The new technology boom in Latin America creates an exciting new narrative for the region. We expect continued momentum from Latin America in the near future and look forward to welcome more of the businesses driving this innovation to the Nasdaq family.
Watch Nicolas Szekasy of KaszeK Ventures describe how he works with companies in his firm’s portfolio in his full interview with Nasdaq here.
Ivana Ferreira is responsible for leading Nasdaq’s Listings and Capital Markets efforts in Latin America. She works closely with investment banks, law firms, and private equity and venture capital firms to support capital market transactions. In addition, she works with companies to support their listing on Nasdaq. Mrs. Ferreira graduated from Northeastern University in Boston, Massachusetts.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
