Welcome back to Foreign Policy’s Latin America Brief.
The highlights this week: We dive deep into the region’s economics, visiting a tech summit in Brazil, examining the U.S. sanctions snapback on Venezuela, and gaining insights from a father of the World Trade Organization.
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Around 34,000 people from more than 100 countries descended on Rio de Janeiro this week for the second Web Summit Rio. The event, which highlights Latin America’s start-up scene, has quickly become the region’s largest tech conference. Investors listened to new companies from Mexico to Chile pitch products and services. Last month, another start-up conference in the Brazilian city of Porto Alegre drew more than 23,000 people.
The high attendance reflects broad enthusiasm about Latin America’s start-up scene. It has come a long way in the last decade, said investor Rodrigo Baer of Upload Ventures, speaking at a Web Summit Rio session. “When I started investing, we wanted to hire a marketing manager for [food delivery app] iFood and there wasn’t one. Nobody had been a marketing manager for a start-up in 2012,” he said.
Now, dozens of start-ups in the region have grown to be worth over a billion dollars each, in part driven by a boost during the COVID-19 pandemic. People became increasingly reliant on technology to work, access health care, and receive pandemic stimulus money. When central banks lowered interest rates to get the economy moving again in 2021, optimistic investors doled out record amounts of money to regional start-ups.
Now, investment levels are back down to pre-pandemic levels. But the start-up environment has matured, Buenos Aires-based venture capital investor Claire Díaz-Ortiz said at the summit. “You see more early-stage funding happening than a couple of years ago,” she said. New investor-led accelerator programs for founders include mentoring as well as financial support.
Latin America’s largest tech start-ups are concentrated in the financial sector, such as Brazil’s Nubank and Mexico’s Bitso. Many people in the region lack conventional bank accounts but have smartphones. So-called fintechs have capitalized on this mismatch; in 2023, they continued to attract more money than any other start-up category, according to the Association for Private Capital Investment in Latin America.
Other start-up categories with high fundraising numbers reflect current economic trends, including logistics tech start-ups, which seek to take advantage of companies aiming to nearshore supply chains in Latin America. Representatives from Brazil-based cargo airline and logistics firm Modern Logistics were at the Rio conference, scouting out “possible partners and vendors, and seeing how we can collaborate,” CEO Cristiano Koga said.
Climate tech companies have also attracted increased funding. Web Summit attendees included the founders of Vammo, an electric motorcycle service for delivery workers operating in São Paulo, and Órigo Energy, a Brazilian firm that offers discounts on electricity bills for customers who switch to solar power.
Artificial intelligence featured in many companies’ plans, too. Brazil- and U.S.-based start-up Traive uses algorithms that model the financial risk of agriculture firms based on more than 2,500 data inputs such as crop type, vehicle usage, and local climate. Its method was recently used to create sustainable bonds for deforestation-free soy from Brazil’s Cerrado region.
Start-ups have the potential to make Latin America’s business environment more competitive, and their ability to do so often depends on countries’ regulatory environments. But many start-ups are also shaping government regulations themselves.
Solar installation in Brazil has risen since Órigo Energy and its industry peers successfully pushed for rules on the sector. The change gave “legal security and predictability for investments,” CEO Surya Mendonça said. A large session at the summit was devoted to how G-20 countries can adopt policies that facilitate healthy environments for start-ups.
Argentina’s representative to that session, tech entrepreneur Hanna Schiuma, said that some central banks in the region, such as in Colombia and Brazil, have supported the fintech landscape by running tests of regulations that could be appropriate for new types of financial products. Brazil’s work on digital innovation was applauded last month by the publication Central Banking, which named it “Central Bank of the Year.”
Schiuma acknowledged that the current economic uncertainty in Argentina had generally made business planning more difficult at the moment. The dust has not yet settled on President Javier Milei’s sweeping economic policy overhaul. But taken as a whole, “we are in a moment of clear growth of the start-up ecosystem in the region,” she said.
Sunday, April 21: Ecuador holds a referendum on changes to security policy.
Monday, April 22: The United Nations Security Council discusses Haiti.
Venezuela sanctions snapback. True to its warnings, the United States announced the reimposition of broad oil and gas sanctions on Venezuela on Wednesday after a six-month hiatus, citing Caracas’s failure to meet commitments on conditions for July presidential elections. U.S. officials cited bans on opposition candidates and their substitutes as sticking points.
U.S. oil firms will not face total restrictions on operating in the country, however. Chevron can still drill in Venezuela under permission that was granted separately from the October sanctions relief. The U.S. Treasury Department encouraged other oil companies to apply for similar permission.
Whether or not the temporary U.S. sanctions relief on Venezuela was successful depends on whom you ask. Advocates of a maximum pressure strategy argue sanctions should have never been retracted, while others point out that the negotiations that secured sanctions relief led to the release of U.S. and Venezuelan prisoners in the country and spurred the presidential primary process within Venezuela’s opposition.
Haiti’s transition team. After weeks of haggling, Haiti has named a transitional government that includes representatives from civil society, several political parties, and the country’s interfaith religious community. The body was announced on Tuesday and has seven voting members and two nonvoting members. Acting Prime Minister Ariel Henry is expected to step down once the council is installed, although no date was immediately announced.
The difficulties Haiti faced identifying members of the transition team suggests another delay may be in store as they select a new prime minister. “We’re wishing them success, but this does not look like a clear path. It looks very murky, very uncertain,” the Miami Herald’s Caribbean correspondent, Jacqueline Charles, told FP’s Ravi Agrawal in an interview last week.
Conservation mystery. As Venezuela’s political future hangs in the balance, so, too, does the fate of its sea turtle populations. Over the past year, conservationists in La Sabana, a town on the country’s coast that is home to four of the seven sea turtle species on Earth, noticed that many of the reptiles were dying.
The conservationists were unable to discover the “silent killer” until Washington Post reporter Ana Vanessa Herrero began to research the problem. Herrero spoke to experts elsewhere in Venezuela who were studying an invasive species of ocean grass known as beach cabbage or sea lettuce. She relayed information about the plant to the conservationists in La Sabana, who have attempted to control its growth.
Venezuelan environmental officials have been informed about the invasive species and said they would work to eradicate it. But local activists said no work had begun as of early this month. After residents’ own beach cabbage management efforts, La Sabana is eagerly awaiting sea turtles who will again lay eggs on its shores, the Washington Post reports.
Which of the following Venezuelan cities is not on the coast?
Maracaibo
Punto Fijo
Barcelona
Barinas
Barinas is in northwestern Venezuela.
Latin American officials are in Washington this week for the World Bank and International Monetary Fund (IMF) spring meetings. Those bodies are weighing proposals to address debt pressure on poor countries and to increase climate finance on a global level. Brazilian Finance Minister Fernando Haddad on Wednesday led a call for a new tax on the super-rich to fund the green transition.
The meetings also weighed the IMF’s latest predictions about the direction of the world economy. Although its worst fears of post-pandemic stagflation have not come to pass, the fund said global growth is still well below its potential. Many low-income countries remain debt-saddled, and ongoing wars could interrupt trade.
The IMF also said that “geoeconomic fragmentation” was stifling growth, a reference to trends that include Western efforts to put space between them and the Russian and Chinese economies. The fund noted that dividing the world into geoeconomic blocs “could reduce capital and knowledge flows significantly and suppress growth,” adding that “multilateral cooperation is needed.”
Beyond the IMF, veterans of the global trade system are more candidly sounding alarms. Current and former Latin American officials, including Haddad, have voiced wariness about geoeconomic clubs in recent months, both publicly and in private policy meetings.
“[I]t is a misstep for the U.S., as a global leader, to restrict market openness and promote the onshoring of production,” former Uruguayan central banker and former Inter-American Development Bank President Enrique Iglesias argued last month in an interview with a policy researcher that was shared with Foreign Policy.
Iglesias was a protagonist in talks that led to the founding of the World Trade Organization in the 1990s. It was a period of optimism about the rules for the global economy. “[N]ow I wonder if it was too good to be true,” he said.
“This concept of ‘friendshoring’ goes against capitalism, delving into ideological control. It appears as though the leading superpower is acting from a position of fear, almost akin to that of a smaller nation. What underpins this fear of competition within the United States?”
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