#009: Is Mexico holding back LatAm?
Plus, buckets of cash flow south from the Summit of the Americas
Hey technopolists,
The Summit of the Americas kicked off in LA this week amidst the controversial absences of Mexican, Venezuelan, Cuban, and Nicaraguan leaders. But geopolitical fragmentation hasn’t stopped some of the continent’s largest companies from announcing blockbuster investment programmes.
Plus, LatAm is (mostly) sitting pretty based on the World Bank’s latest growth forecasts — but why is Mexico getting downgraded so heavily?
What’s hot
🦄 Ecuador gets a shiny new horn. Kushki, the B2B payments provider, landed a $1.5bn valuation and became Ecuador’s first unicorn with their latest $100mn round. The fundraise is an extension from their last round, with the same cast of investors as their $86mn round last June. With the new funding, Kushki 2.5x’d their valuation in one year, which is roughly in line with the 200% revenue growth they’re boasting (though management declined to report actual figures). Given the current macro environment, a round extension is smart both for Kushki and investors, and I predict that we’ll see more of these in the coming months. I explain why on Twitter. (TechCrunch)
🏦 Mexican neobank makes bank. Klar, believed to be the largest neobank in Mexico, raised $70mn at a $500mn valuation this past week, setting itself on a soonicorn trajectory. The timing is ripe for Klar, which boasts 4x revenue growth since its $15mn Series A fundraise last summer. General Atlantic again led this fundraise after leading Klar’s last round; though it’s not technically an extension, Klar is raising this round from the same cast of investors. Check out the tweet thread (above) to learn more about why we’re going to see more follow-on investments and extensions. (TechCrunch)
🤑 The Summit drops guap. Two major private sector investment announcements have come out of the Summit of the Americas hosted in LA. First, US Vice President Kamala Harris announced a $1.9bn multi-sector investment commitment from companies like Visa, Gap, Agroamerica, and Millicom into Guatemala, Honduras, and El Salvador (who noticeably boycotted the summit alongside Mexico over some nations’ exclusion). Then, CEO Sundar Pichai unveiled Google’s 5-year, $1.2bn investment plan for Latin America. Notably, Google plans to promote digitalisation and entrepreneurship by hiring more Latin American engineers, building a high-speed subsea cable to South America, launching Google Wallet, and creating a startup accelerator on the continent. A quarter of their funds are aimed at promoting sustainability and women’s economic advancement. The announcements come as a win for all involved, as the investments will create jobs, improve knowledge transfer, and accelerate digital transformations in each country. However, much of the private sector investment is helping to plug gaps in traditionally public concerns, like Google’s ownership of subsea cables. This won’t placate Big Tech skeptics who see the investment as a modern project of Western neoliberal resource extraction. (Bloomberg Linea)
What’s not
🪓 Not with a bang, but with a whimper. Bloomberg Linea has confirmed that at least 50 Kavak employees have quietly been terminated in the past few weeks by the Mexican car platform. The report comes amidst widespread speculation that Kavak is struggling in the current macro climate, given the grim experiences of comparable companies like Carvana (whose valuation has plummeted 90%). Kavak is the latest Latin American unicorn to make layoffs, joining a list that includes Loft, Facily, QuintoAndar, Creditas, and 2TM. (Bloomberg Linea)
🍔 If you ain’t first, you’re last. Uber CEO Dara Khosrowshahi announced that Uber Eats will withdraw from Brazil because they failed to be the #1 food delivery provider in the country, losing out to competitors Rappi and iFood. Rather than duke it out for market share, Uber is exiting and focus on other more profitable markets. Uber’s stock price has tanked 40% this year, so Khosrowshahi is feeling the heat to take significant action that improve margins. Unfortunate for him, Uber is a public company fighting privates, so the pressure for profitability means that Uber can’t duke it out for market share against land-grabbing cash-burners like Rappi. (Bloomberg Linea)
Stat of the week
The World Bank sent a strong caution to global markets this week when they slashed their updated 2022 global growth forecast from 4.1% to 2.9%. Latin America, however, looks relatively resilient with only -0.1% shaved off their forecasts.
Mexico is the noticeable laggard driving the decline, with serious concerns about resource nationalisation, inflation, and global supply chain bottlenecks shaking analyst confidence. Elsewhere, Brazil, Colombia, and Argentina received upgrades.
Smart links
Growing faster than Nubank in Brazil, Nu Mexico is going beyond credit cards (LABS)
Nubank: Finding brilliance in brokenness (The Generalist)
Klar, believed to be Mexico’s biggest digital bank, raises $70mn (TechCrunch)
Some Latin American economies have benefitted from the war in Ukraine (The Economist)
33 million Brazilians go hungry, the highest level in 30 years (Folha de S. Paulo - Portuguese)
Biden Backs Economic-Recovery Agenda at Summit of the Americas (WSJ)
Summit of the Americas: US aims private funds at migration (Al Jazeera)
Netflix cracks down on password sharing, but early efforts in Peru are a mess (Rest of World)
Uruguay’s Government Courts Amazon, Netflix in Bid to Expand Entertainment Exports (Bloomberg Linea)
Musings from Mexico City #4 (Kate Kiewel)