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How President Manuel Lopez Obrador Quietly Made Peace with Big Business, Mexico Breathes a Sigh of Relief at USMCA, BBVA Aims to Accelerate Colombian Fintechs with New Hub, and More from LatAm

Other featured stories include: Mexico Raises Minimum Wage by 20%, Solving Data Challenges for Hyperl
LATAM Business Weekly
How President Manuel Lopez Obrador Quietly Made Peace with Big Business, Mexico Breathes a Sigh of Relief at USMCA, BBVA Aims to Accelerate Colombian Fintechs with New Hub, and More from LatAm
By dataPlor • Issue #49 • View online
Other featured stories include: Mexico Raises Minimum Wage by 20%, Solving Data Challenges for Hyperlocal Delivery Startups, U.S. Launches Initiative to Spur Investment in Latin America, Brazil’s Via Varejo Sees Sales Rising Over 30% in 2020 on Revamp, and Brazilian Food Delivery Startup Mimic Raises $9M Seed Round

How Mexico's Leftist President Manuel Lopez Obrador Quietly Made Peace with Big Business
Mexican President Andres Manuel Lopez Obrador is proving more accommodating to Mexico’s big business during his first year in office than his rhetoric often suggests.
Meeting regularly with Lopez Obrador, corporate bosses have steered him toward more business-friendly policies, according to more than two dozen senior executives and government officials who spoke to Reuters. Quietly, they’ve also urged AMLO to “soften some of his rhetoric”.
“What some business heavyweights describe as an improving relationship yielded fruit in August, when Lopez Obrador backed off a threat to tear up several government contracts awarded to private companies to build and operate natural gas pipelines” (Reuters). 
Lopez Obrador said the deals ripped off taxpayers, but business leaders warned him that these cancellations might worry foreign investors and could disrupt ongoing trade negotiations with the United States. They also told him that the infrastructure would help deliver cheap energy to the president’s top priority: the country’s poorest.
“We used all means of persuasion,” said Carlos Salazar, head of Mexico’s top private sector association, the Business Coordinating Council (CCE), and one of the main mediators on the pipeline dispute.
Elected in July 2018 as Mexico’s first left-wing president in over thirty years, Lopez Obrador has promised to transform Mexico by slashing inequality. As a firm believer in the reforming power of government, AMLO has pledged to strengthen Mexico’s leading state-run enterprises - oil firm Petroleos Mexicanos (Pemex) and power utility the Comision Federal de Electricidad (CFE) (Reuters). 
The president’s clashes with institutions that check presidential power- from market regulators to the Supreme Court- have historically unsettled investors. As reported by Reuters, he has described money as the “mother or father of the Devil” and pilloried “neo-liberal” free market economics as the source of Mexico’s woes hundreds of times.
However, he’s publicly acknowledged that he cannot create jobs, spread wealth and realize his goal of 4% annual economic growth without private capital. 
The private sector has been largely supportive in public, but in private, many leading executives have expressed concern surrounding his economic stewardship, said Andres Rozental, a business consultant and former deputy foreign minister.
“They’re worried to death about what’s going on… The uncertainty, the disincentivization of private sector involvement in the economy,”  Rozental said.
After Feeling Trump’s Wrath, Mexico Breathes a Sigh of Relief at USMCA
Last week, Mexico’s politicians and business community breathed a sigh of relief that the country would maintain its free-trade system with the United States, its number one trade partner.
“Mission accomplished,” Foreign Minister Marcelo Ebrard said Tuesday.
Photo Courtesy of CNN
Photo Courtesy of CNN
It’s hard to overstate the importance of U.S. trade to Mexico. Roughly 80% of Mexican exports go to the United States. 
Eugenio Salinas, president of the Foreign Trade Committee of Concamin, the Mexican industrial body, said “the level of uncertainty has had more effect than anything that came out of the negotiations.”
Foreign investment is crucial for Mexico, which has one of the lowest rates of public investment in Latin America. Most of the investment by far “is done by the private sector,” Finance Minister Arturo Herrera noted at an Atlantic Council event in October. Mexican officials hope to see a surge in investment after the treaty is ratified.
The Washington Post reported that the Mexican peso edged up Wednesday for the sixth straight day, as reports emerged of an agreement on the trade pact.
That’s not to say the country was thrilled with all of the changes in the new North American agreement, or USMCA, as Mexico’s booming auto industry will face new limitations. 
This uncertainty was especially intense for the auto sector, one of Mexico’s biggest and most important industries. 
According to The Washington Post
“The Trump administration was eager to shift more factory jobs back to the United States. In the end, the three countries agreed that at least 40 percent of each car’s content must be produced by employees making $16 an hour or more to qualify for duty-free trade.”
This will be a big change for Mexico, where auto-assembly workers earn $7.34 an hour on average, and auto-parts workers make $3.41 an hour, according to government statistics from 2017 (The Washington Post). 
Another major concession involved labor protections. United States unions — and their Democratic supporters in Congress — were disappointed that Mexican unions are largely controlled by politicians and business executives, who put a cap on wages.
This year, Mexican legislators passed a law guaranteeing workers’ rights to approve contracts and choose union leaders by secret ballot. 
 In recent weeks, Mexico’s negotiating team faced additional pressure on labor provisions. They rejected a proposal to allow U.S. inspectors to visit to guarantee enforcement of the measures, insisting it would violate the country’s sovereignty.
“The idea of the inspectors was ruled out,” said Mexico’s chief negotiator, Jesús Seade.
Mexico agreed to a dispute-resolution mechanism under which U.S. and other foreign experts could travel to the country to check on possible violations. While Mexicans feared President Trump’s frequent threats to tear up NAFTA, Mexican President Andrés Manuel López Obrador thanked Trump on Tuesday for his help during the negotiations.
“Without his cooperation, it wouldn’t have been possible to reach this accord,” he said. 
Mexico, which alone among the three countries ratified the initial USMCA negotiated last year, approved the new changes on Thursday night.
“López Obrador, a one time critic of NAFTA, supported the negotiations to redo the treaty, which were largely carried out before he took office a year ago. He is eager to inject life into the moribund economy, which failed to grow this year” (The Washington Post). 
BBVA Aims to Accelerate Colombian Fintechs with New Hub
Last week, BBVA officially opened its latest Open Space in Bogotá, Colombia: the third such space opened by the bank. The hub, which was previously aBBVA Innovation Center, has been under construction for the past year in preparation for its relaunch as Open Space Bogotá. 
Jaime Espinosa, Director of BBVA Open Innovation in Colombia, explains why the bank decided to launch a new Open Space, and the impact he hopes it will have on the local fintech community.
As reported on the bank’s website, BBVA has a history in Colombia spanning over 20 years. 
“The bank is committed to its role in the economic and social development of the country, for example by providing retail and business banking services to over 2.4 million customers. Of that figure, a huge 1.4m BBVA Colombia customer now also use digital channels to engage with the bank, with an even more impressive 1.3m of that number using mobile devices to conduct their financial lives” (BBVA). 
BBVA recently announced that 50% of its global customer base now engages with the bank digitally, with 28.1 million mobile users via smartphones, tablets, and other connected devices. 
According to Espinosa, helping clients to adopt digital services and giving them the necessary tools to be more informed is “at the heart of BBVA’s strategy” in Colombia. This means ensuring customers can bank when, where and how they want; including through BBVA’s digital channels, and face to face – whether it be in a physical branch or via video.
Why Colombia?
According to BBVA, a  high proportion of customers using the bank’s digital services, combined with the vibrancy of the local fintech ecosystem, were the main drivers for launching a third Open Space in Bogotá
“Colombia has the third highest number of home-grown fintech companies in LATAM, behind Brazil –  which has the most – and Mexico,” according to Espinosa.
The Open Space concept strives to build hubs for both entrepreneurial co-working and corporate collaboration.
“The spaces provides a source of inspiration and knowledge for both the startups based there and employees of the bank, with lectures, courses and workshops available to attend throughout the year.”
 The bank’s first Open Space launched in Madrid in 2010 as part of BBVA’s mission to connect and collaborate with the entrepreneurial world. Five years later, a second location was launched in Mexico City.
Early days
“The site has been closed for some time while we’ve transformed the old Innovation Center into the new Open Space, so we’re excited to finally open doors to this fantastic new facility in the heart of Bogotá. It’s not just a space for BBVA, but for the entire entrepreneurial ecosystem in the city.” Espinosa stated.
Currently, Jaime Espinosa and his team are focusing on curating an exciting calendar of events covering a variety of topics, such as raising seed funding. Last week, Open Space Bogotá hosted its first event: exploring digital transformation in Latin America, the “innovation culture”, and “how corporates can better deploy technology within their organization”. 
Plans for 2020
Looking to the upcoming year, Espinosa will be welcoming several startups to the space, offering them not only a special environment, as well as several events and initiatives to support collaboration. 
There will be opportunities for startups to collaborate with the bank too, via the Fast Track program that enables startups to develop proof-of-concepts and subsequently co-create them with BBVA. Espinosa hopes that at least two startups will be moving in soon, working alongside six of Espinosa’s colleagues from Open Innovation.
Mexico Raises Minimum Wage by 20%, still less than $1 per hour
This week, Mexico raised its national minimum wage 20%, although the revised pay still doesn’t amount to even $1 an hour.
The Labor Department said the lowest legal wage will be 123.22 pesos a day starting Jan. 1, or about $6.50 per day at current exchange rates: is a 20% boost from the 120.68-peso minimum wage prevailing this year.
While the increase is well above the 3% annual inflation rate, it is barely enough to keep one person over the poverty line. 
As reported by The New York Times
“The minimum wage in a narrow stretch of territory along the border with the United States is higher than in the rest of the country, due to higher living costs. Starting next year the border minimum will rise about 5%, to $9.75 a day.”
President Andres Manuel Lopez Obrador appeared at a ceremony to announce the wage increase, accompanied by various business leaders.
“I am aware that we still have a long way to go, because we feel behind,” he said, referring to decades in which the purchasing power of the minimum wage declined in real terms (The New York Times). 
The Mexican president  acknowledged that minimum wages “cannot be decided by decree,” and thanked business leaders for supporting the decision to raise the minimum.
Carlos Lomelín, the head of the Business Coordinating Council, called the increase “great news for Mexico.”
Mexico has been criticized for keeping wages artificially low, suggesting that the country has been “used to lure auto assembly and manufacturing jobs from the United States”.
The New York Times notes that the country’s domestic economy has also suffered from a lack of internal demand because of low wages.
Solving Data Challenges for Hyperlocal Delivery Startups
dataPlor’s Founder and CEO, Geoffrey Michener, published a piece for ITProPortal about some of the biggest data challenges for hyperlocal delivery startups, and the latest technology helping to overcome them. 
A few years ago, there was a boom in on-demand delivery startups which subsequently shut down their operations. With 2020 around the corner, the spotlight has returned to the hyperlocal delivery space. An improved e-commerce experience on mobile devices is enabling companies to quickly and more effectively deliver items to consumers at home, and consumers are embracing the convenience. 
Investors are also embracing these platforms, and companies such as Seamless, Postmates, Doordash, among others, are growing and securing significant funding. According to a Statista report, online food delivery alone will be a $28 billion market in the US by 2023, and online platforms make up the fastest-growing segment. What’s more, many consumers are willing to pay up to 30 per cent more for same-day delivery. And those numbers are increasing as some companies offer delivery for items even within a few hours.
Still, uncertainties remain about whether or not hyperlocal delivery startups can keep up with ever-increasing consumer demands, compounding logistics costs, and the ever-looming threat of delivery giants like Amazon Prime. Here’s a look at some of the biggest challenges for hyperlocal delivery startups right now, and the latest technology helping to overcome them.
Consumer demand for faster fulfilment
Delivery expectations are changing. Consumers want fast fulfilment and expect businesses to deliver it. Consequently, hyperlocal delivery startups are in a position to meet these demands. However, time and money are wasted when couriers have to drive back and forth along the same route to complete deliveries. Unlike traditional third-party logistics providers, which accept next-day delivery orders up until a recent cut-off time, hyperlocal delivery services require careful planning and the flexibility to change routes in nearly real-time.
Route optimisation software, which relies on machine learning, is helping to tackle this problem. Algorithms, which use historical data to make future predictions, can identify the optimal times for delivery and help to streamline delivery routes. For instance, the Beijing-based site JD.com promises to deliver orders in as little as 30 minutes across China using an algorithm that determines the proximity of JD.com’s warehouses and distribution centres, as well as offline retailers, to a customer. If an offline retailer is closer to the customer, then the AI system will request that retailer to complete the order directly, decreasing the total route time or the number of stops on a route.
Many hyperlocal delivery companies are using these features, and even letting the customer know that the delivery person has a stop or so to make before they’ll receive their item. Customers appreciate the real-time tracking this software allows, and companies can still meet the demand of delivering items quickly.
Scaling in new markets
The success of a hyperlocal delivery service in one market does not mean that it can be replicated easily in another market. Outside of the Western world, hyperlocal delivery services face many challenges to scale efficiently and effectively. Language barriers, differing government regulations, and a lack of infrastructure are among the most obvious obstacles.
These problems are compounded by a lack of hyperlocal data to utilise. Necessary consumer data, such as addresses, may be written in a native language or in a manner that doesn’t translate to data systems, making it difficult to standardise delivery processes. Brick and mortar businesses may also lack an online presence, creating a barrier for hyperlocal delivery startups seeking to track their inventory, business hours, and location. For delivery services to even begin, these small stores must have all records digitised, which is not always the case.
This is all critical data necessary to identify new partners in order to grow their services and delivery zones. And collecting this hyperlocal data to make the unit economics work in emerging markets is a real challenge. In smaller markets, there still remains traditional shops that rely on loyal customers and do not necessarily need an online presence. Of course, these stores already do or soon will find it difficult to compete with newer stores that utilise digital marketing campaigns and offer easy online delivery.
While collecting data via crowdsourcing is nothing new, it is becoming easier due to the prevalence of Internet-connected devices in emerging markets. For instance, there are already a number of services that rely on crowd-sourced data from individuals around the world to report traffic and weather conditions.
Waze is one of the most famous success stories of using crowd-sourced data to reveal real-time traffic conditions. These same data collection methods can be used to collect and verify data on local businesses as well. When delivery startups have access to better hyperlocal data, then they can analyse and identify opportunities for growth more quickly.
Where hyperlocal delivery is headed
Hyperlocal delivery is growing in complexity and scope. Startups in this space must prepare to implement the latest technology to handle the rising demand for instant delivery. What’s more, innovation is needed to compete with e-commerce giants like Amazon and Walmart, who are spending heavily on logistics development and creating a consumer expectation of same-day for everything. These companies are also investing in technologies such as autonomous vehicle technology and self-driving drones and robots to make last-mile deliveries more cost-effective in the not so distant future.
The ability to compete will somewhat rely on data. Hyperlocal delivery companies that can access to utilise this data will likely better meet consumer needs. While consumers are demanding faster deliveries, they are open to companies outside of the tech giants to take a piece of this market.
Hyperlocal delivery is a complicated undertaking, and growing competition requires hyperlocal startups to innovate constantly. Given this, we might see more of these smaller companies merging in order to share data, resources, and, more importantly, technology talent that knows how to create and maintain systems to take a larger piece of the market.
It is, however, becoming easier for all companies to improve delivery times and collect critical data that can help them scale without decreasing the speed or quality of their services. And as more and more consumers demand two-day, same-day, and two-hour delivery, this data will play an integral role in creating loyal customers.
U.S. Launches Initiative to Spur Investment in Latin America
On Tuesday, the Trump administration launched an initiative seeking to foster investment by the U.S. private sector in energy and infrastructure in Latin America and the Caribbean. As reported by The Washington Post, the effort is being described as a “complete re-calibration” of U.S. policy.
Mauricio Claver-Carone, deputy assistant to the president and senior director for Western Hemisphere affairs, told Latin American diplomats gathered at the White House that it is not as easy for the U.S. to mobilize support for its allies because it is not a state-controlled government: likely an allusion to China, which is seeking to expand its influence in Latin America.
According to The Washington Post, China has provided more than $141 billion in loan commitments to Latin America and the Caribbean since 2005. Still, the United States was the primary source of the $147 billion that the region received last year, according to the United Nations Conference on Trade and Development.
“Our goal here is to let the region know we are the best of friends,” Claver-Carone said, adding that if countries are able to offer the right business environment, the U.S. private sector could potentially finance the $100 billion to $150 billion needed by the region for annual infrastructure spending (The Washington Post). 
The Inter-American Development Bank estimates the infrastructure investment gap in Latin America is around 2.5% of GDP,  adding that this shortfall affects the poor the most, because they spend more of their income on infrastructure services.
Claver-Carone stated the goal of facilitating job creation and economic growth in the region by promoting the private sector as the primary engine of growth for infrastructure projects is a major adjustment in United States foreign policy.
“You have to show it not only being tough on our foes, but with the 30-plus countries that are friends, by showing them we are their best friend, and by making sure we are their choice partners,” Claver-Carone said.
The Washington Post reported that Commerce Secretary Wilbur Ross called on U.S. business to be more active, as they are currently  involved in only 2% of the construction projects in Latin America, compared to 19% by companies from Spain and 7% from China.
Brazil's Via Varejo Sees Sales Rising Over 30% in 2020 on Revamp
Brazilian electronics and appliances retailer Via Varejo SA (VVAR3.SA) sees total sales rising more than 30% in 2020 as it boosts capital spending and revamps operations to transform itself into a leading player in the sector. 
“The company should improve its performance quarter after quarter next year… Our mission is to achieve the biggest turnaround yet seen in Brazilian retail,” Chief Executive Roberto Fulchenberguer said in Via Varejo’s first meeting with investors and analysts since a management reshuffle (Reuters). 
Fulchenberguer’s remarks come six months after retail veteran Michael Klein and his family gained control of Via Varejo from GPA SA, a subsidiary of France’s Casino Guichard Perrachon SA. 
Since June, Via Varejo has replaced managers and started an overhaul of its business practices, including an internal probe that so far has found evidence of accounting fraud between the first quarter of 2018 and the second quarter of 2019.
“In this business there is no such thing as scoring a goal with the hand… It’s as simple as buying and selling properly,” Chief Financial Officer Orivaldo Padilha said.
For now, the company estimates a cash burn of 900 million reais (approximately 221.4 million USD) related to provisions over the next three to four years. 
As reported by Reuters, in the fourth quarter alone, Via Varejo sees an impact of up to 1.4 billion reais on its “bottom line” stemming from irregularities.
When asked if the company plans to sue former controller GPA in connection with the probe, Padilha said there is not enough information to determine appropriate judicial measures. 
“So far all individuals involved in the accounting fraud were mid-level executives of Via Varejo, but the investigation is still ongoing,” he said.
Shares in Via Varejo have jumped almost 56% since November 13, when the company announced the start of the probe. 
2020 Expansion
Reuters reports that Via Varejo aims to boost capital expenditure to 700-800 million reais next year, compared with 322 million reais in the first nine months of 2019. 
In addition to opening up to 90 new brick-and-mortar stores, mostly in the north and northeastern regions, Via Varejo plans to renovate 100 of its existing 1,071 stores, said Chief Operating Officer Abel Ornelas. The company is also considering divesting non-core assets, according to Padilha. 
Fulchenberguer added, however, that the company is not considering the sale of online retail platform Extra.com. 
“It doesn’t make sense to us,” he said.
Brazilian Food Delivery Startup Mimic Raises $9M Seed Round
Mimic, a Brazilian food delivery platform that operates solely out of “dark kitchens”, raised R$37.4M ($9M USD) in a seed round led by Monashees. Caray, Valor Capital Group, and other private investors also made contributions. 
As reported by LatAm List, the Brazilian VC fund Monashees has previously invested in other logistics startups including 99, Loggi and Rappi. Food delivery penetration in Brazil still ranges from 3 to 4%, compared with 20% in the Chinese market.
“[In Brazil,]the delivery time is long, the price is not competitive and the quality of the dishes is still poor. We aim to tackle these 3 issues,” said Andres Andrade, founder and President of Mimic.
The startup intends to act as a platform to provide delivery-only “dark kitchens”, which exist only to serve delivery services and do not have any sit-down space, saving costs for the customer.
“We intend to build product and data teams that will make delivery journeys more consistent. The aim is to make deliveries with 20 minutes, which is only possible with technological intelligence… For example, Mimic might start automatically producing an order if it knows that you always order a certain hamburger on a Thursday,” says Andrade.
According to LatAm List, Mimic aims to cover all of São Paulo with 8 “dark kitchen” locations by the end of 2020. This new funding will also allow the startup to improve their digital platform to facilitate the delivery process, helping to serve more customers high-quality food at the right value for money.
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