6 ms·

I'm sad that LATAM is still lagging in terms of VC investment. Brazil+Mexico consumers should rival SEA.

by pxue 3y ago

busterarm 3y ago
There are still too many investors who remember the debt crisis in the 80s and Argentina's more recent crisis and subsequently treat LATAM like it has the plague. That and a history of various governments seizing assets for the state. It also doesn't help their situation any that LATAM is hot for crypto assets either.
- prottog 3y ago
  It's a good example of why a stable government, strong property rights, and rule of law are necessary (but not sufficient) conditions for long-term wealth development.
  - digging 3y ago
    I don't really agree with this overall statement (broad as it is). Rule of law is vague, or it has a specific meaning I don't know of, but high levels of wealth building coincide with illegal activity and/or (just as bad for stability) laws written by corporations to excuse their own behavior. If we're comparing these nations to historically capitalist nations, we're comparing two runners in a race where one of them shot the other with a gun, so it's just not reasonable to say that these countries are inherently doing something wrong for prosperity.
    - doxeddaily 3y ago
      > Rule of law is vague Not really. It means functioning courts that are fair. It means you don't pay people off to get your way. > so it's just not reasonable to say that these countries are inherently doing something wrong for prosperity. Nowhere in Latin America has there ever been the kind of stability you would find in a place like the US, Canada, Britain etc.
      - digging 3y ago
        > Not really. It means functioning courts that are fair. It means you don't pay people off to get your way. Ok, well then we definitely don't have rule of law in the US.
      - mrguyorama 3y ago
        see >comparing two runners in a race where one of them shot the other with a gun The old world settled in north america, and plundered in south america.
- moralestapia 3y ago
  The issue with LATAM is corruption, intertwined with mediocrity. This won't ever change. There's talent, sure, but you could just hire it out and keep your business based in a sane jurisdiction.
  - busterarm 3y ago
    > The issue with LATAM is corruption, intertwined with mediocrity. This won't ever change. There's absolutely nothing mediocre about how Mexico has developed their economy in spite of the absolutely absurd geographical logistics problems that they're faced with. LATAM is filled with ingenuity. The talent pool is strong, but opportunities are few. -- because see previously mentioned issues in my first post.
    - moralestapia 3y ago
      >There's absolutely nothing mediocre about how Mexico has developed their economy LOL, what? Do you speak from experience? Because I do. Watch this [1], that's the mentality of the average individual who has enough interest into science and tech to attend an astronomy congress. You're looking at the top of the distribution, it's downwards from there. >in spite of the absolutely absurd geographical logistics problems that they're faced with Ok, you may be just trolling right now. Mexico has amazing geographical and logistical advantages: * 3,000+ kms of border with the largest economy in the world, plenty of goods that go from/to the US, go through Mexico * Access to both the Atlantic and the Pacific oceans * 14th largest country by area, the vast majority of land is (or could be at least) productive * Great weather the whole year, fresh water and rain * Not hit by natural disasters as much as other places in the world What are you talking about? 1: https://www.youtube.com/watch?v=QAwiyS5aTcU https://www.youtube.com/watch?v=QAwiyS5aTcU
      - busterarm 3y ago
        I'm talking about the difficulty of distribution _within_ the country. Where shipping from city A to city B might mean crossing multiple mountain ranges. These obstacles are also obstacles to maintaining a stable government. Historically Mexico's economy has been fairly isolated and government has been fairly unstable. This has an enormously negative economic impact. You're looking at things with privileged glasses and ignoring all of the difficulties overcome for Mexico to get where it is today.
- mc32 3y ago
  I think you hit it on the head. Investors want predictability and stability. The history of expropriation or defaulting will not inspire investment. You can't have governments with a caudillow attitude and people who support that attitude. Maybe one option is for a regional system where there is more incentive to not renege on deals and agreements when things don't go their way. Also if it's regional there is less likelihood of claiming imperialism --but who knows, they have their own rivalries.
  - digging 3y ago
    The answer is equity and fair trade (in the general sense). Let's not pretend that Latin American countries had fair deals and paths to prosperity and they defaulted for fun. The history of economic instability in the region is the history of foreign violence and exploitation as much as it is about corruption and poor governance. I'd be interested in seeing what a poor nation could do if given the support to just develop its own economy.
    - mc32 3y ago
      LatAm was not the only region which was exploited by Corps or the IMF, international banking, etc. Others overcame those problems. But I think right now one of their options is to create a regional market like an EU zone and invest in themselves and hopefully realize some of their potential. They can set tehir own rules and expectations as well as benefits and penalties. Just as there is naive art, there is naive economics where people believe in maligning capitalism and expropriation as solutions to their economic malaise.
      - digging 3y ago
        > Just as there is naive art, there is naive economics Not so. Naive art is merely a subset of all art.
- hgsgm 3y ago
  Is LATAM hot for crypto, or just one guy in El Salvador?
  - busterarm 3y ago
    Absolutely scorching hot. You only have to look at all of the crypto startup activity based in Miami to have your answer.
  - dan-rocks 3y ago
    Everywhere. Argentina and Venezuela due to need, Brazil due to the criminal opportunities it offers. It's even a running joke in Brazil that every week they arrest a new crypto-pyramid ring leader and give it the name "Sheik of Bitcoin", "Pharaoh of Bitcoin", etc. the press is running out of royal titles to give out.
    - busterarm 3y ago
      In Columbia it's hugely popular for tax-avoidance - plus the state is planning to create its own digital currency.
      - whymauri 3y ago
        Colombia, parce.
        busterarm 3y ago
        Lol, my bad. I do this all the time, due to proximity to an actual place named Columbia.
- dan-rocks 3y ago
  I am from LATAM and I would treat the region the same way as you're pointing out - like it has the plague. There is so much regulatory and legal uncertainty, not to mention the sky-high costs at every junction, that it's nearly impossible to build profitable, high-quality companies in the same way it happens elsewhere. I give credit to Nubank for being an exception, but everything else has been such a massive bust.
- wslh 3y ago
  Don't forget the corruption bar. In LATAM corruption has a very low bar that permeates almost everything. Also, businesses move very slow in countries such as Mexico and Brazil. Regarding specifically about Argentina, crypto is also successful because several crypto technologies and security were invented in Argentina. Even if you don't believe it. Argentina is a pioneer in many security technologies and is a top entrepreneurial country. In the context of this article indeed it does not matter because entrepreneurs incorporates companies in a different jurisdiction, so the investment ends up in companies founder by Latin americans. Look at Auth0 [1], Mercadolibre, etc. [1] https://www.crunchbase.com/organization/auth0 https://www.crunchbase.com/organization/auth0
- Enginerrrd 3y ago
  Honestly I remember jokes from my childhood 25 years ago about how Brazil in 10-20 years would be the next big emerging economy, and had been like that for at least 75 years.
browningstreet 3y ago
I was involved in a VC/incubator situation in LATAM some years ago. The conundrum then was that local talent could build all the tech apps/platforms/companies they wanted, but the local market could never be turned into customers/consumers. I'm guessing things have evolved since, but all the LATAM companies I encountered were building for the world-not-LATAM in terms of market.
- anovikov 3y ago
  Why not? Just not as gullible/influenced by advertisement/celebrity worship/branding/following the herd as Westerners? Or simply poor? I witnessed people trying to build consumer app in one East European country which was their home one. Eventually they quit saying that "it can't work, people here are not stupid enough". Same app worked fine in the U.S. market even as they have never been in the U.S., had no idea of the culture things, and even their English was so-so.
  - narag 3y ago
    Just not as gullible/influenced by advertisement/celebrity worship/branding/following the herd as Westerners? They're definitely Westeners.
  - dan-rocks 3y ago
    1. Vast amounts of all types of fraud 2. Terrible legal and regulatory environment 3. Political instability 4. Surreal cost burden at every junction of the productive process (cheapest car in Brazil for example is USD 15000, which is the same price as the cheapest car in the US) 5. Zero customer loyalty, people jump from service to service to obtain a 0.01% discount
    - pg_1234 3y ago
      > 5. Zero customer loyalty, people jump from service to service to obtain a 0.01% discount Sounds like a consumer base who've learnt to reciprocate corporate loyalty.
  - busterarm 3y ago
el_nahual 3y ago
LatAm has two issues. The first is demographics (and "demographics is destiny"). There is not an expected population boom the way you have in West Africa. There will be tons of growth (look at Mercado Libre, a 63 billion dollar company), but that growth will come from people coming online and spending online, without the tailwinds of a growing young population. The second issue with LatAm is that—for "startup" purposes—just two markets. Brazil and Mexico. Everything else doesn't really add up and requires lots of localization for very small markets. This is exacerbated in places like the Caribbean. So you end up having quite concentrated political/macro risk in two countries. There are VERY good reasons to invest in LatAm, but the best case scenario for LatAm is something like 2-3x South Korea, not China.
- teachrdan 3y ago
  > just two markets. Brazil and Mexico Naively, I'd expect Argentina + Chile to be essentially one giant local market, as they are united by language, geographic proximity and relative wealth. Why isn't that the case?
  - el_nahual 3y ago
    a) Vastly different currencies/policy exposure. Argentina is an economic dumpster fire while Chile (and/or Uruguay) is kind of the "Singapore of south America." b) Even together they are tiny. Chile is 25% the GDP of Mexico, with a much higher GDP per capita. ie, Mexico is both much larger now and has much more headroom to grow.
  - travisjungroth 3y ago
    Governments. Two sets of laws, two currencies, etc. This applies to every LATAM country. It’s just Brazil and Mexico are the biggest. It’s also bad because the governments are relatively bureaucratic and/or corrupt. So there are 650 million people, but it’s like the value is in a few dozen hard to open boxes.
  - wslh 3y ago
    Impossible. The EU is more legally united after war that we are being all neighbors in peace. The fragility of the legal system in LATAM is a nightmare. It can change from day to night and the law is arbitrary. There is never a precise right or wrong. Chile is the most organized country but now the one with more potential.
financypants 3y ago
Just an anecdote: we were invested in a social commerce type company in brazil. They were losing 30%+ of inventory to theft, and management seemed to not be able to keep a handle on it. There are very good reasons vc investment lags here.

I'm sad that LATAM is still lagging in terms of VC investment. Brazil+Mexico consumers should rival SEA.

by pxue 3y ago

I'm sad that LATAM is still lagging in terms of VC investment. Brazil+Mexico consumers should rival SEA.

There are still too many investors who remember the debt crisis in the 80s and Argentina's more recent crisis and subsequently treat LATAM like it has the plague. That and a history of various governments seizing assets for the state. It also doesn't help their situation any that LATAM is hot for crypto assets either.

prottog 3y ago
It's a good example of why a stable government, strong property rights, and rule of law are necessary (but not sufficient) conditions for long-term wealth development.
- digging 3y ago
  I don't really agree with this overall statement (broad as it is). Rule of law is vague, or it has a specific meaning I don't know of, but high levels of wealth building coincide with illegal activity and/or (just as bad for stability) laws written by corporations to excuse their own behavior. If we're comparing these nations to historically capitalist nations, we're comparing two runners in a race where one of them shot the other with a gun, so it's just not reasonable to say that these countries are inherently doing something wrong for prosperity.
  - doxeddaily 3y ago
    > Rule of law is vague Not really. It means functioning courts that are fair. It means you don't pay people off to get your way. > so it's just not reasonable to say that these countries are inherently doing something wrong for prosperity. Nowhere in Latin America has there ever been the kind of stability you would find in a place like the US, Canada, Britain etc.
    - digging 3y ago
      > Not really. It means functioning courts that are fair. It means you don't pay people off to get your way. Ok, well then we definitely don't have rule of law in the US.
    - mrguyorama 3y ago
      see >comparing two runners in a race where one of them shot the other with a gun The old world settled in north america, and plundered in south america.
moralestapia 3y ago
The issue with LATAM is corruption, intertwined with mediocrity. This won't ever change. There's talent, sure, but you could just hire it out and keep your business based in a sane jurisdiction.
- busterarm 3y ago
  > The issue with LATAM is corruption, intertwined with mediocrity. This won't ever change. There's absolutely nothing mediocre about how Mexico has developed their economy in spite of the absolutely absurd geographical logistics problems that they're faced with. LATAM is filled with ingenuity. The talent pool is strong, but opportunities are few. -- because see previously mentioned issues in my first post.
  - moralestapia 3y ago
    >There's absolutely nothing mediocre about how Mexico has developed their economy LOL, what? Do you speak from experience? Because I do. Watch this [1], that's the mentality of the average individual who has enough interest into science and tech to attend an astronomy congress. You're looking at the top of the distribution, it's downwards from there. >in spite of the absolutely absurd geographical logistics problems that they're faced with Ok, you may be just trolling right now. Mexico has amazing geographical and logistical advantages: * 3,000+ kms of border with the largest economy in the world, plenty of goods that go from/to the US, go through Mexico * Access to both the Atlantic and the Pacific oceans * 14th largest country by area, the vast majority of land is (or could be at least) productive * Great weather the whole year, fresh water and rain * Not hit by natural disasters as much as other places in the world What are you talking about? 1: https://www.youtube.com/watch?v=QAwiyS5aTcU https://www.youtube.com/watch?v=QAwiyS5aTcU
    - busterarm 3y ago
      I'm talking about the difficulty of distribution _within_ the country. Where shipping from city A to city B might mean crossing multiple mountain ranges. These obstacles are also obstacles to maintaining a stable government. Historically Mexico's economy has been fairly isolated and government has been fairly unstable. This has an enormously negative economic impact. You're looking at things with privileged glasses and ignoring all of the difficulties overcome for Mexico to get where it is today.
mc32 3y ago
I think you hit it on the head. Investors want predictability and stability. The history of expropriation or defaulting will not inspire investment. You can't have governments with a caudillow attitude and people who support that attitude. Maybe one option is for a regional system where there is more incentive to not renege on deals and agreements when things don't go their way. Also if it's regional there is less likelihood of claiming imperialism --but who knows, they have their own rivalries.
- digging 3y ago
  The answer is equity and fair trade (in the general sense). Let's not pretend that Latin American countries had fair deals and paths to prosperity and they defaulted for fun. The history of economic instability in the region is the history of foreign violence and exploitation as much as it is about corruption and poor governance. I'd be interested in seeing what a poor nation could do if given the support to just develop its own economy.
  - mc32 3y ago
    LatAm was not the only region which was exploited by Corps or the IMF, international banking, etc. Others overcame those problems. But I think right now one of their options is to create a regional market like an EU zone and invest in themselves and hopefully realize some of their potential. They can set tehir own rules and expectations as well as benefits and penalties. Just as there is naive art, there is naive economics where people believe in maligning capitalism and expropriation as solutions to their economic malaise.
    - digging 3y ago
      > Just as there is naive art, there is naive economics Not so. Naive art is merely a subset of all art.
hgsgm 3y ago
Is LATAM hot for crypto, or just one guy in El Salvador?
- busterarm 3y ago
  Absolutely scorching hot. You only have to look at all of the crypto startup activity based in Miami to have your answer.
- dan-rocks 3y ago
  Everywhere. Argentina and Venezuela due to need, Brazil due to the criminal opportunities it offers. It's even a running joke in Brazil that every week they arrest a new crypto-pyramid ring leader and give it the name "Sheik of Bitcoin", "Pharaoh of Bitcoin", etc. the press is running out of royal titles to give out.
  - busterarm 3y ago
    In Columbia it's hugely popular for tax-avoidance - plus the state is planning to create its own digital currency.
    - whymauri 3y ago
      Colombia, parce.
      - busterarm 3y ago
        Lol, my bad. I do this all the time, due to proximity to an actual place named Columbia.
dan-rocks 3y ago
I am from LATAM and I would treat the region the same way as you're pointing out - like it has the plague. There is so much regulatory and legal uncertainty, not to mention the sky-high costs at every junction, that it's nearly impossible to build profitable, high-quality companies in the same way it happens elsewhere. I give credit to Nubank for being an exception, but everything else has been such a massive bust.
wslh 3y ago
Don't forget the corruption bar. In LATAM corruption has a very low bar that permeates almost everything. Also, businesses move very slow in countries such as Mexico and Brazil. Regarding specifically about Argentina, crypto is also successful because several crypto technologies and security were invented in Argentina. Even if you don't believe it. Argentina is a pioneer in many security technologies and is a top entrepreneurial country. In the context of this article indeed it does not matter because entrepreneurs incorporates companies in a different jurisdiction, so the investment ends up in companies founder by Latin americans. Look at Auth0 [1], Mercadolibre, etc. [1] https://www.crunchbase.com/organization/auth0 https://www.crunchbase.com/organization/auth0
Enginerrrd 3y ago
Honestly I remember jokes from my childhood 25 years ago about how Brazil in 10-20 years would be the next big emerging economy, and had been like that for at least 75 years.

browningstreet 3y ago

I was involved in a VC/incubator situation in LATAM some years ago. The conundrum then was that local talent could build all the tech apps/platforms/companies they wanted, but the local market could never be turned into customers/consumers. I'm guessing things have evolved since, but all the LATAM companies I encountered were building for the world-not-LATAM in terms of market.

anovikov 3y ago
Why not? Just not as gullible/influenced by advertisement/celebrity worship/branding/following the herd as Westerners? Or simply poor? I witnessed people trying to build consumer app in one East European country which was their home one. Eventually they quit saying that "it can't work, people here are not stupid enough". Same app worked fine in the U.S. market even as they have never been in the U.S., had no idea of the culture things, and even their English was so-so.
- narag 3y ago
  Just not as gullible/influenced by advertisement/celebrity worship/branding/following the herd as Westerners? They're definitely Westeners.
- dan-rocks 3y ago
  1. Vast amounts of all types of fraud 2. Terrible legal and regulatory environment 3. Political instability 4. Surreal cost burden at every junction of the productive process (cheapest car in Brazil for example is USD 15000, which is the same price as the cheapest car in the US) 5. Zero customer loyalty, people jump from service to service to obtain a 0.01% discount
  - pg_1234 3y ago
    > 5. Zero customer loyalty, people jump from service to service to obtain a 0.01% discount Sounds like a consumer base who've learnt to reciprocate corporate loyalty.
- busterarm 3y ago

el_nahual 3y ago

LatAm has two issues. The first is demographics (and "demographics is destiny"). There is not an expected population boom the way you have in West Africa. There will be tons of growth (look at Mercado Libre, a 63 billion dollar company), but that growth will come from people coming online and spending online, without the tailwinds of a growing young population. The second issue with LatAm is that—for "startup" purposes—just two markets. Brazil and Mexico. Everything else doesn't really add up and requires lots of localization for very small markets. This is exacerbated in places like the Caribbean. So you end up having quite concentrated political/macro risk in two countries. There are VERY good reasons to invest in LatAm, but the best case scenario for LatAm is something like 2-3x South Korea, not China.

teachrdan 3y ago
> just two markets. Brazil and Mexico Naively, I'd expect Argentina + Chile to be essentially one giant local market, as they are united by language, geographic proximity and relative wealth. Why isn't that the case?
- el_nahual 3y ago
  a) Vastly different currencies/policy exposure. Argentina is an economic dumpster fire while Chile (and/or Uruguay) is kind of the "Singapore of south America." b) Even together they are tiny. Chile is 25% the GDP of Mexico, with a much higher GDP per capita. ie, Mexico is both much larger now and has much more headroom to grow.
- travisjungroth 3y ago
  Governments. Two sets of laws, two currencies, etc. This applies to every LATAM country. It’s just Brazil and Mexico are the biggest. It’s also bad because the governments are relatively bureaucratic and/or corrupt. So there are 650 million people, but it’s like the value is in a few dozen hard to open boxes.
- wslh 3y ago
  Impossible. The EU is more legally united after war that we are being all neighbors in peace. The fragility of the legal system in LATAM is a nightmare. It can change from day to night and the law is arbitrary. There is never a precise right or wrong. Chile is the most organized country but now the one with more potential.

financypants 3y ago

Just an anecdote: we were invested in a social commerce type company in brazil. They were losing 30%+ of inventory to theft, and management seemed to not be able to keep a handle on it. There are very good reasons vc investment lags here.