In January 2018 Magma Partners teamed up with Chinese coworking business, Kr Space, to launch the first China-Latin American accelerator to connect Chinese and Latin American entrepreneurs and investors.
With the recent news that Tencent invested $180M into Brazilian neobank Nubank at a $4B valuation, we’e seeing Chinese interest and investment in Latin America move beyond the common infrastructure projects backed by the Chinese government. The Chinese private sector is taking note of Latin America’s growing tech ecosystems and is capitalizing on opportunities to help the region follow a similar development path to China’s.
As the US pulls further away from Latin America, China is becoming an increasingly important partner for startups and companies across the region looking for investment and direction. As President Trump’s trade war intensifies, Chinese FDI into the US has dropped by 92% to $1.8B, while Chinese FDI to Latin America has surged to $15.3B in the first half of 2018.
This move by China is a strategic one. Latin America is ripe for investment and China and Chinese companies could be interesting partners for the region.
For one, Latin America is now a mobile-first market with over 200 million smartphone users. It is the second-fastest growing market for mobile in the world, and Latin American consumers are becoming quick adopters of new technologies and global apps.
You would think that in 2018 you could pay almost any bill online. But that’s not the case in many Latin American countries, although the process is becoming easier.
While companies such as Xoom, Multicaja, and Nequi are streamlining online payments in Mexico, Chile, and Colombia, respectively, many people still find themselves queuing up in three-hour lines to pay their utilities, credit cards and other bills every month.
One expat in Mexico explained how he used five different payment methods for his electric bills over ten months because the rules changed each time.
So how do people keep track of their payments and wade through the bureaucracy each month to pay their bills? What happens if you send a payment late or the providers send the bill to the wrong tenant? It depends on the country.
The insurtech industry worldwide received over US$2.3B in investment in 2017, a 36% increase from the year before. From 2014 to 2017, the Latin American share of the insurtech market grew from 1% to 7.6%, and the number of insurtech startups increased by 114% in 2017. This uptick is logical as insurance plays a vital role in stabilizing emerging economies and minimizing risk.
Latin America is underinsured, despite steadily growing incomes over the past two decades. Currently, insurance penetration, calculated as the ratio between insurance premiums written and GDP, hovers between 2-4% across the region compared to 6.2% globally and 7.3% in the US, the world leader, in 2015. Latin America still lags behind the rest of the world in insurance coverage.
As Latin America’s most developed economy, Chile is also the most developed insurance market in Latin America. Earthquake insurance is required for all mortgages and after Chile’s 2010 earthquake, a group of mostly international insurers paid out claims that reached around 4% of Chile’s GDP.
Compared to the rest of the region, Chile has a relatively open and well-regulated insurance industry. While Brazil has become a top player in insurtech, the insurance industry in Brazil is mired in complex regulations. Still, growing middle classes across Latin America have yet to invest heavily in comprehensive insurance policies for a host of reasons.