Only 11% of Latin Americans have access to credit from formal institutions. In fact, in Chile, 37% of adults have no accounts with a formal financial provider, even though Chile has one of the highest levels of financial inclusion in the region.
In comparison, under 40% of adults in Colombia, Mexico, and Peru have formal bank accounts. However, in one of the most chronically underbanked parts of the world, improvements in financial technology have opened the doors for widespread financial inclusion throughout the Latin America.
More and more people are accessing mobile payments, credit systems, and P2P lending opportunities through recent advances in local fintech, and investors are catching wind of the enormous opportunity.
While there have been considerable advances in financial technology in Latin America in the past five years, many tools are still only available in the countries where they were founded. A report by Oliver Wyman, released in September 2016, provides a snapshot of local fintech players in Chile, Brazil, Mexico, and Colombia.
Colombia has come a long way as a country and as a place to do business. The sensationalized version of Colombia that Narcos depicts is no longer accurate, though the reputation lives on.
Colombia’s history is long and complicated, filled with violent groups trying to control the country’s lucrative drug trade. But there’s so much more to Colombia than just drugs. 2017’s historic peace agreement between the Colombian government and the FARC, the largest guerrilla group, is a potential inflection point in Colombia’s history. And if I had to bet on a single Latin American country for the next 10-15 years, Colombia would be my pick.
Though many think it’s coffee, Colombia’s largest export is actually petroleum, which makes up over a third of the country’s exports, followed by coal, coffee, cut flowers, and gold. Coffee, however, was responsible for pushing Colombia toward a manufacturing based economy. After the War of a Thousand Days, which ended in 1902, Colombia’s coffee boom pushed the country to seek better transportation and manufacturing mechanisms.
Coffee production consistently grew in the 20th century, employing more than 500,000 families. While the government managed Colombia’s economy conservatively, the the political atmosphere turned increasingly unstable, corrupt and violent from the drug trade.
In 1991 the country adopted a new constitution. The motive for this wasn’t necessarily economic, but rather political, in order to make peace and bring drug lords to justice. Colombia remained relatively stable economically until the late 1990s when fiscal deficits cause a higher public debt which resulted in the country’s first economic recession in over 60 years. But by the early 2000s, the economy began to recover, due to high petroleum prices and stable coffee prices. (more…)
I’m excited to introduce the Crossing Borders podcast (iTunes, Stitcher) where I share the stories of top entrepreneurs doing startups across borders and the investors who support them, with a focus on companies that have some relationship to Latin America.
Over the past 6+ years in Latin America, I’ve met entrepreneurs hailing from countries around the world doing business across borders. Some do business in Latin America. Others use Latin America as a base to target the US market.
They’re some of the most diverse, risk taking, trailblazing entrepreneurs in the world. But when I come back to the US, Latin American startups just aren’t on people’s radars.
They’re mostly stuck on stereotypes of corruption, narcos and failed states. They see Latin America as a monolith and couldn’t tell you the difference between Mexican, Chilean and Argentine food, much less the difference between each country’s business climate.
As Magma portfolio companies started to do business in the US and meet with US investors, they came across this same ignorance of Latin America and its entrepreneurs. US entrepreneurs and investors have slept on Latin America and are missing out on some of the most interesting entrepreneurs in the world. And some of the best stories. (more…)
Last month, I headed off to Colombia’s Caribbean coast with six Chilean friends for some much needed vacation. Through a fluke of holidays, my friends could take a two week trip with only 5 days off from their jobs. Colombia is in the middle of some amazing changes: double digit economic growth, improved safety everywhere except near the Panama and Venezuela borders. Construction’s everywhere. Lots of tourism. No noticeable violence. Less corruption. If you have a chance, it’s worth checking out.
Many people in the US think that South American countries have similar cultures, but it can’t be farther from the truth. Colombians are very different from Chileans. They’re open, easygoing, cheerful, love to talk. They seem less classist. They’re happy to smile at you on the street and generally give good customer service. They seem to be more entrepreneurial: I never once saw anyone begging for money, they were always trying to sell something, whether it was a piece of gum, tours, trinkets or even prostitutes.
Our flight to Cartagena stopped in Bogotá at 10pm and had a layover until 630am and we had no intention of staying cooped up in the airport all night. Nearly every Colombian directed us to Andres Carne de Res for dinner and drinks. Like all taxis in Colombia, our minibus taxi didn’t have a meter and we negotiated our rate ahead of time. After 30 minutes, we arrived at the restaurant.
Andres Carne de Res is a loud, festive mix between a restaurant and a dance club. While the food wasn’t that great and the prices were high, we had a great time just soaking in the atmosphere. After being in Chile for almost a year, it was a welcome experience. People were open, they smiled at you. The servers told jokes. People were happy and they showed it. They were drinking aguardiente and rum. They were dancing on the tables, in the aisles, everywhere. This was one of the only restaurants where we actually got exactly what we ordered. On the Caribbean coast, we’d be lucky to receive 50% of what we ordred. Many times there were substitutions (meat for chicken, fish for beef etc) without any comments.
After we left, we walked around a bit. It was a bit eerie. Not many people were out at 2am on a Thursday, as peoples get up and go to bed earlier than in Chile. I don’t know if this is common or not, but we had to walk through metal detectors and get patted down to get into nearly all of the bars and restaurants in this area of the city. We had a good time, but were exhausted as we got back to the airport to fly to Cartagena. I’m going to have to go back to actually visit Bogota in the future.
I slept the entire flight from Bogota to Cartagena and still was wearing my heavy shirt and winter coat from Chilean winter as I got off the plane in Cartagena. BAM! I was slammed by a wall of heat and humidity that I couldn’t escape until I got back to Chile. It was 80 degrees with 90% humidity at 8am! The first thing I noticed was music. It’s everywhere. On the streets, in taxis, in restaurants. It floats from houses, pulses from plazas. You don’t need headphones because Colombia has a soundtrack. And it’s not just any type of music. It’s happy, up beat, danceable. There’s almost always at least one person dancing and it wasn’t uncommon to walk past a pharmacy or convenience store and see the employees having an impromptu dance party.
We got to our hostel, Media Luna, and decided to explore. Cartagena is an old port city that oozes history. Starting in the 1500s, the Spanish used it as the main port to export gold, silver and other commodities from their South American colonies and built fortresses and city walls to defend it. Throughout the years it was held by the Spanish, by British pirates, attacked by the french, used as a slave trading outpost and much more. Walking through the brightly painted buildings behind the city walls, you can imagine pirates coming ashore to party or the Spanish counting their gold.
There’s not much to do in Cartagena other than walk around. The center is dominated by upscale boutique hotels, high end restaurants and expensive international chain stores and the other parts are dominated by backpackers hostels. Our hostel was a beautifully converted mansion with a small swimming pool. It was full of backpackers, didn’t have locks on the rooms, but served our purposes. If you want to party, stay here. If not, stay somewhere else.
I wasn’t that big of a fan of the city, as the beaches weren’t that nice, but the worst part were the sex and drug tourists and the prevalence of those willing to fulfill those vices. We ran into a middle aged Italian who destroyed a shop and wreaked havoc at our hostel as he was high out of his mind on cocaine. Two Australians who were sharing a prostitute for the week. Middle aged British guys negotiating prostitute prices on the street. Pickpockets, prostitutes and drug dealers seemed to be everywhere. And it was HOT. We had a great time with our fellow tourists, but it just wasn’t my style. After a few days, it was time to move on to Tayrona.
Tayrona National Park
We got up at 5am to catch a bus to Tayrona National Park. I slept the entire four hour drive and when I got off the bus, we were at the entrance to the park in the middle of nowhere. There were a few shops and we had breakfast, including a lulo juice which ended up being my favorite. We entered the park and started to walk. It was about and hour and half on a path through humid rainforrest, then onto pristine white sand beaches on the Caribbean. By the time I got to camp, I looked like I’d been in a downpour. We had the option of staying in tents, hammocks or in a cabin with fans, full bathrooms and electricity. Since there were 7 of us and low season, it wasn’t that much more expensive than getting 7 tents. It was the right choice. The tents were miserable because the humid air didn’t move at night and we were subjected to intense tropical downpours for about 2 hours per day. Plus the bugs. Anyone who slept outside got eaten alive.
Colombians are much more formal than Chileans and that point was hammered home when we saw three Colombian friends from Medellin interacting with each other. One guy was annoyed at the other and said “no me gusta la manera en que usted me esta tratando,” the English equivalent would be “sir, I don’t like the way you are treating me.” All my Chilean friends looked at each other, expecting his friend to give him shit for being so formal, but just said “lo siento, tiene razón” “I’m sorry, you’re right.” In Chile or the US, friends would never dream of saying that to each other. They’d say say some variation of “dude stop being a dick.” We saw other examples of Colombia formality that was really different from what I’ve gotten used to in Chile.
Tayrona was tied for my favorite part of the trip. The national park consists of multiple pristine white sand beaches with warm tropical water. There are a few small shacks that serve food, but otherwise it’s not developed. They had all of the fresh fruit you could imagine in tropical sizes that were 4x what I’m used to seeing. I learned to love 75 cent Aguila beers, arepas, plantains and tropical fruit juice. There were lots of tourists from all over the world, but the park is big enough that you have privacy, time to think, hang out, swim. At one of the beaches fish would just swim up and nibble at your feet. The whole park was incredibly relaxing. I did absolutely nothing but swim and eat amazing fish and fruit for three days. Although I could have stayed longer, we decided to move onto Taganga the next day.
We took a 45 minute speedboat ride over to Taganga from Tayrona and arrived in a small beachside town of about ~1000. It had a really strange vibe: lots of tourists and lots of locals selling pretty much anything to tourists. We stayed at what seemed to be the only place with hot water, AC and a pool. It was a nice place run by Israelis who went on their trip after their military service and decided to stay. The place is clearly catered to other Israelis, of which there are tons in Taganga, but we were welcomed with open arms.
The places has an even stranger vibe than the town itself, with drugged out Israelis listening to psytrance at all hours of the day. The entire town has an eerie feel straight out of a movie that I can’t quite describe. Between little kids trying to sell us drugs and women, to local girls speaking Hebrew, English and other languages to “cater” to the travelers and foreigners of all nationalities there to party, it just wasn’t my scene. I also witnessed the phenomenon of local girls who didn’t consider themselves prostitutes but would charge guys “if they thought the guys were willing to pay.” Really strange. It just didn’t sit right with me, but we had a great time because we took day trips to incredible beaches each day instead of staying in the city.
We took the death bus back to Cartagena from Taganga. I call it the death bus because Colombians are crazy drivers. They don’t obey road signs, lane markers or right of way. I consider myself a good driver, but I would have had problems on this “highway.” The road went to a single lane from time to time and drivers steamed ahead, blaring their horn to warn anyone in their way. People passed without warning. Our driver dozed off multiple times with sheer drop offs to the right only to pull back at the last moment. I put my life in the hands of the driver and just went to sleep.
We made it to Cartagena and then onto Isla Baru. The place was packed. Completely full of people. We were led to believe it was a small beach with no electricity, hammocks, a place to get away. As we arrived, I couldn’t imagine staying 3 days with all those people. Luckily, they were all day trippers. As they left, maybe only 100 people stayed overnight. This was my favorite part of the trip. No electricity besides some generators, fresh fish, white sand beaches, warm water, shooting stars. It was perfect. We rented a cabin with real beds, but quickly realized that was a mistake. If you were out of the breeze, it was unbearable. I slept in a hammock and then under the stars covered in mosquito nets and was perfect. My friends who stayed in the beds slept horribly and were eaten alive. The only drawback were the locals who tried to sell you everything. Aggressively. It got tiresome, but if you ignored them, they went away.
We saw sex tourism on display yet again. A middle aged Mexican who the locals claimed was a narco had rented the best room above a restaurant for himself and his entourage, which consisted of three body guards and four Colombian prostitutes. He’d drink 2 liters of Absolut per day and had trouble walking anytime after about 10am. He’d force his help to bring his mattress right to the waters edge so he could “hang out” with his prostitutes under the cover of darkness. He bitched out one of his bodyguards worse than I’ve ever heard anyone bitch anyone out in my life. This guy and the bugs were the only downside of Isla Baru.
The coolest part of Isla Baru happened at night. After a day of relaxing on the beach, we bought a few bottles of rum and drank under the stars. One of the locals came over and told us we had to check ou the water at night. He wouldn’t tell us why. We dubiously walked over to the water and splashed around. The water lit up. There’s an algae in the water that when irritated, light up like little LEDs. It was incredibly beautiful. No lights, glowing water and shooting stars. Perfect. I tried again sober the next night and it was just as cool.
Our last day, we took a tiny boat around the islands and ended up on a tiny island where we docked in a bay. We had fresh caught crabs and lobsters right from the bay, drinking fresh drinks out of coconuts. If I ever go back, I’d spend more time on these small islands than on the more developed beaches and cities.
Overall, I had an amazing time. I didn’t bring a working phone, had internet for about three days total and just let my mind go blank. It was great to get closer to a group of friends who I’ve know for awhile. I met some incredible people and really liked the Colombians I met. I’d love to go back to to check out Bogota and Medellin. I have a feeling the country is going to be one the stars of South America over the next few decades.