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LATAM Weekly: U.S. Backs Senior Trump Advisor Mauricio Claver-Carone to Lead Latin America Bank and More...

LATAM Business Weekly
LATAM Weekly: U.S. Backs Senior Trump Advisor Mauricio Claver-Carone to Lead Latin America Bank and More...
By dataPlor • Issue #75 • View online

U.S. Backs Senior Trump Advisor Mauricio Claver-Carone to Lead Latin America Bank
President Donald Trump’s administration plans to nominate a U.S. official to lead the top development bank for Latin America, seeking to break the organization’s six-decade tradition of choosing a chief from the region.
Bloomberg reports that the Treasury Department said it’s supporting Mauricio Claver-Carone, the senior director of the National Security Council for Western Hemisphere Affairs, to head the Inter-American Development Bank. Since its founding in 1959, the IDB has had four presidents, all coming from Latin America, with the executive vice-president typically nominated by the U.S.
“We are confident that his leadership of the IDB will strengthen its ability to deliver development impact to the region,” Treasury Secretary Steven Mnuchin said in a statement.
Claver-Carone looks poised to vie for the job against Argentina’s Gustavo Beliz, who also has the support of Mexico, amid other candidates. The United States’ backing is crucial to win the position, given its 30% share of the bank and de-facto veto power over its leadership decisions. The biggest stakeholders after the U.S. are Brazil and Argentina at 11% each, and Mexico at 7.2%.
Photo Courtesy of Bloomberg
Photo Courtesy of Bloomberg
The current head, Luis Alberto Moreno of Colombia, took over in 2005 and is set to step down at the end of September. The next IDB chief will face a number of challenges, including a humanitarian crisis in Venezuela and Latin America’s growing role at the epicenter of the COVID-19 pandemic. The region has 8% of the world’s population but about half of the new virus deaths.
In a phone interview, Claver-Carone stated, 
“This is a unique opportunity to help lead the bank through the COVID-19 crisis, and to mobilize all the tools at our disposal. We will commit to a one-term, five-year presidency and we hope to institutionalize one or two terms maximum to lead by example.”
A lawyer by training, Claver-Carone was one of the Trump administration’s ardent critics of Venezuelan President Nicolas Maduro, playing a key role in shaping U.S. policy toward Venezuela since he began his post back in 2018. Such efforts included rallying international support behind opposition leader Juan Guaido and ramping up sanctions against the Maduro regime.
A former host of a foreign affairs talk show, Claver-Carone previously served as the U.S. Executive Director for the International Monetary Fund, supporting a $56 billion loan to Argentina; which at the time was led by President Mauricio Macri. He also worked as senior adviser for international affairs at the Treasury Department.
Facebook's WhatsApp Adds Digital Payment Features in Brazil
On Monday, Facebook Inc.’s WhatsApp messaging service rolled out a system across Brazil that will allow users to send money to individuals or local businesses within a chat, attaching payments as they would a photo or video.
WhatsApp is working with Cielo, Brazil’s largest credit and debit card operator, to process the payments. The news sent Cielo’s shares soaring 30% on a day when stocks worldwide, including in Brazil, were in red due to fears of a second coronavirus wave.
WhatsApp tested the system in India beginning in 2018. The Brazil launch will be the first nationwide rollout and will introduce the ability to directly pay a business. The company has over 120 million individual users in Brazil, its second-largest market behind India.
“WhatsApp is heavily used there, both by people and small businesses…We think we can help grow digital payments, help grow the digital economy with small businesses, and help support financial inclusion,” Matt Idema, WhatsApp’s Chief Operating Officer said of Brazil. 
As reported by Financial Times, many of Brazil’s small businesses already use WhatsApp as a marketing tool to answer questions or send catalogs, Idema said.
Back in April. Facebook Chief Executive Mark Zuckerberg said that the company was expanding tools for businesses in WhatsApp. 
The rollout in Brazil was long planned, but may help users who are shut in during the coronavirus pandemic, Idema said.
“We can’t have the kind of interactions with each other that we normally would, if you want to lend someone cash or if you want to buy something from a local business,” he said.
The system will use Facebook Pay and be free to individual users, while charging businesses a fee for receiving payments. Initially, the system will accept payments from debit and credit cards from Banco do Brasil, Nubank and Sicredi.
Pipo Saude Raises $4.6M to Bring Healthcare Benefits Management Services to Brazil
Pipo Saude, a Brazilian provider of healthcare services for businesses and their employees, has raised $4.6 million in a new round of funding to expand its footprint in Brazil.
“The company’s platform offers recommendations for the healthcare products that fit the team, enabling businesses to improve the quality of life of their employees…We go all the way to the end beneficiaries,” said Chief Executive and Co-Founder, Manoela Ribas Mitchell
Pipo Saude helps companies price their insurance appropriately and bring down the medical loss ratio that companies suffer. Medical inflation in Brazil may be worse than in the U.S., with prices rising at around 20% per year.
As is the case in the U.S., Brazilians often default to hospitals and urgent care facilities when they’re sick or injured. The “urgent care culture,” as Mitchell calls it, drives up the cost for providers and employers. 
“We try to move the needle toward preventive care and specialist doctors,” Mitchell said.
Backing the company with a $4.6 million round are two of Latin America’s top investment firms — Monashees  and Kaszek Ventures . OneVC, the San Francisco-based investment firm that also invests in Latin American tech companies, also participated in the round.
Pipo Saude makes profit via commissions and has a few corollaries in companies like Zenefits  (in its earliest days), Amino  or the Canadian care benefit management company, Mitchell said.
The company currently has about 30 employees on staff, and some of the new cash will be used to scale the business.
Tech Crunch reports that for co-founders Mitchell, Vinicius Correa and Thiago Torres, the healthcare market was an obvious choice when they looked to start their own company. Torres and Mitchell had known each other as students at the University of São Paulo, where they both studied economics. 
Mitchell and Torres both pursued careers in private equity, where Mitchell worked at Temasek and then at Actis, focusing on healthcare, while Torres also went to Agavia Investimentos.
Correa worked in startups, initially as an employee at Nubank, where he met Mitchell through a mutual friend.
The size of the Brazilian healthcare market alone is enormous, posing a substantial opportunity for companies like Pipo Saude
“We’re talking about a $50 billion revenue pool…If we want to build a very robust product we have to focus on Brazil for quite a while,” says Mitchell.
Real Estate Startup La Haus Brings U.S. Tech Services to Latin America
La Haus, a Mexican-Colombian proptech platform recently raised $10M in a Series A led by Kaszek Ventures, after previously raising $6M from NFX, Acrew Capital, and other investors in previous rounds. This funding will be used to accelerate the company’s geographic expansion in response to increasing demand for digital solutions in response to the COVID-19 epidemic.
“Because of COVID-19, consumers’ willingness to conduct real estate transactions online has gone through the roof. Fortunately we were in the position to enable that, and we expect to see a permanent shift online in how people conduct all, or at least most, of the home-buying process. This funding gives us ample runway to build the end-to-end real estate experience for the post-Covid Latin America,” said La Haus Chief Financial Officer Sánchez Ríos in a statement.
La Haus is disrupting Latin America’s real estate landscape with an end-to-end marketplace. The company facilitates traditional real estate transactions online, providing homebuyers and sellers with the infrastructure and transparency that oftentimes lacks in Latin America. 
According to LatAm List, 
“La Haus facilitates over $250M in annualized gross merchandise value, with an increase of 300% year-over-year. During the COVID-19 crisis, La Haus’s market share in Bogotá and Medellín grew from 4 to nearly 30%. La Haus also had a recent expansion into Mexico City, which now accounts for over 25% of its business.”
According to Tech Crunch, the company was founded by Jerónimo Uribe and Rodrigo Sánchez Ríos, both graduates of Stanford University  who previously founded and ran Jaguar Capital, a Colombian real estate development firm that had built over $350 million worth of retail and residential projects in the country.
The company has caught the attention of Pete Flint, the founder of Trulia and now an investor at the venture capital firm NFX. Flint, an early investor in La Haus, saw the potential in La Haus  to help the Latin American real estate market leapfrog the services available in the U.S. Spencer Rascoff, the co-founder of Zillow, also invested in La Haus.
“Latin America is very early on in its infancy of having really professional agents and really professional brokerages,” said Flint.
La Haus guides home buyers through every stage of the process, with its own agents and salespeople selling properties sourced from the company’s developer connections.
“The average home in the U.S. sells in six weeks or less. That timing in Latin America is 14 months. That’s the dramatic difference. There is no infrastructure in Latin America as a whole.”
La Haus began by reaching out to the founders’ old colleagues in the real estate development industry and started listing new developments on its service. Now the company has a mix of existing and new properties for sale on its site and an expanded geographic footprint in both Colombia and Mexico.
“We have a portal… that acts as a lead-generating machine,” said Sánchez Ríos. “We aggregate listings, we vet them. We focus on new developers.”
The company has about 500 developers using the service to list properties in Colombia and another 200 in Mexico. So far, the company has facilitated more than 2,000 transactions through its platform in three years.
“Real estate now is turning fully digital and also in this market professionalizing. The publicly traded online real estate companies are approaching all-time highs. People are just prizing the space that they spend their time in… the technologies from VR and digital walkthroughs to digital closes become not just a nice to have but a necessity,” said Flint. 
Joining NFX,  Rascoff, and Kaszek Ventures are a slew of investors, including Acrew Capital, IMO Ventures and Beresford Ventures. Entrepreneurs like Nubank founder David Velez; Brian Requarth, the founder of Vivareal (now GrupoZap); and Hadi Partovi, CEO and founder of Code.org, also participated in the financing.
“We backed La Haus because we saw many of the same ingredients that resulted in a fantastic outcome for many of our successful companies: A world-class team with complementary skills; a huge addressable market; and an almost religious zeal by the founders to solve a big problem with technology,” said Hernan Kazah, co-founder and managing partner of Kaszek Ventures.
Five Legal Tips For Propelling Your Startup's Growth In Latin America
There are many challenges to starting a business in Latin America for those who are unfamiliar with the local legislation, language or business culture. 
As a foreign entrepreneur, it’s important to be mindful of key aspects that characterize the region to expand your business successfully. In recent years, several governments in the region have worked to improve their policies to facilitate foreign business and boost economic growth.
However, legal frameworks remain complex and can be challenging for executives and entrepreneurs to navigate, especially with a language barrier at play.
In his article in Forbes, Craig Dempsey encourages entrepreneurs to consider these five pieces of advice from his experience as the managing director and founder Biz Latin Hub Group, a company that helps businesses expand in Latin America to ensure your business is prepared and in the best position for success.
Choose Your Market Entry Route Carefully
Entrepreneurs have several options for entering Latin America. Deciding how to formally expand is crucial because your method of market entry could influence how your business is governed and the legal obligations you assume. You should make sure the structure you choose is appropriate for your business plan. 
Methods of market entry can vary depending on the country, but common methods include: 
• Forming a new company or a branch office.
• Hiring staff through a professional employer organization (PEO).
• Exporting directly into the country.
• Partnering with a third-party provider for support with commercial representation.
Many executives decide to enter the market by incorporating a company, but this can involve a large-scale investment compared to some other options, such as hiring staff through a PEO solution. Your business may simply want to test its success by exporting products to distributors within your chosen market or markets first and incorporating a company further down the track.
Know The Legal Requirements For Company Incorporation
When it comes time to incorporate a company, it is crucial to understand the requirements for establishing a company in the region.
Common types of legal entities in Latin America for foreign businesses are limited liability companies, corporations, simplified shares companies and foreign branch offices.
Each legal entity will likely set different obligations and governance requirements for each shareholder or partner and may require a different incorporation process. Most entities can be incorporated as follows: 
1. Appoint a legal representative.
2. Prepare the company bylaws in accordance with local legislation.
3. Register the company before government authorities (usually a chamber of commerce or public registry). 
4. Obtain tax identification.
5. Open a corporate bank account (to help you keep your personal assets separate and facilitate business transactions).
Understand Your Company’s Annual Compliance Requirements
While you’re developing business in Latin America, it is crucial to understand your corporate compliance requirements to avoid penalties or other sanctions that can hinder your operations. Corporate compliance varies from country to country. 
Some examples for popular business destinations in Latin America include: 
• Panama: Companies must keep accounting records and provide supporting documentation.
• Colombia: Companies must register “acts, contracts and documents” with the chamber of commerce.
• Brazil: Joint stock companies have to hold an annual shareholders’ meeting and ensure all books are current and updated with the company’s activity. Some companies must also publish their annual financial statements.
• Peru: Corporations need to have “at least two shareholders at the time of incorporation.” Companies must also record transfers and encumbrances in their stock ledger books.
• Mexico: Companies in Mexico must hold an annual shareholders’ meeting “within four months following the close of the company’s fiscal year.” Companies also have to notify the National Register of Foreign Investment (Registro Nacional de Inversión Extranjera) of any foreign investments.
Conduct Regular Entity Health Checks
While doing business in Latin America, it’s a good idea to conduct entity health checks. This health check will help you understand your company’s overall compliance status in relation to government authorities and mitigate risks that could harm your business and reputation. 
For executives of multinational companies expanding across the region, it’s difficult to keep pace with the activities of all subsidiaries. If necessary, hire an independent contractor to audit the company. Conducting an audit (either yourself or through a contractor) will provide reassurance that your business is complying with tax, labor, accounting and corporate obligations. 
Register Your Trademark
A key element of legal security for business development in Latin America is registering a trademark. Your company’s brand distinguishes your products and services from others. 
A trademark is intended to grant legal protection over the commercialization of your services and products. Those who register a trademark typically have exclusive rights to the registered signs or logo and can take action against any third party appropriating it for commercial use. 
To protect your business effectively, make sure to monitor the registration of new trademarks to prevent a third party from using similar distinctive signs that could affect your company’s profitability, reputation and client base. 
Conclusion: Growing Investment Activity
According to an Economic Commission for Latin America and the Caribbean (ECLAC) report, foreign direct investment inflow grew 13.2% in 2018 from to the previous year in those regions. The main investors in the Latin American region were Europe and the United States; Europe focused on doing more business in the Southern Cone, and the United States invested more in Mexico and Central America.
Latin America presents new opportunities among its territories. Sectors such as renewable energy, technology and innovation, e-commerce, and agritech could be attractive for foreign businesses. 
To operate successfully in Latin America, executives must navigate complex and unfamiliar legislation. A clear market entry strategy and an understanding of basic pillars of legal frameworks will help support business development and protect your company’s growth.
Airbnb Partners With Brazil Virus Hotspot São Paulo on Post-Pandemic Tourism
Home rental firm Airbnb struck a partnership with Brazil’s São Paulo state to encourage tourism once the novel coronavirus crisis has passed, a company executive said last Friday.
Virus hotspot São Paulo is the first destination in Latin America chosen by Airbnb as part of a global push to revive its business as authorities ease coronavirus-related restrictions on tourism.
“São Paulo state is at the core of our Brazil strategy and originates many travelers,” Airbnb’s director of governmental and institutional relations for Latin America, Flávia Matos, told Reuters in an interview on Friday.
As reported by The New York Times, Airbnb will have an exclusive page on São Paulo state’s destinations in its platform and will also share with the local government data and information on what is happening elsewhere in the globe.
In 2019, Airbnb has had an economic impact of 10.5 billion reais ($2.08 billion) in Brazil, including the entire chain such as restaurants and shops. The company does not break down São Paulo numbers.
Brazil’s death toll from COVID-19 overtook Britain’s on Friday to become the second highest in the world after the United States, according to numbers released by the Brazilian Health Ministry.
Brazil has 828,810 confirmed cases with 25,982 new infections in the last 24 hours, and 909 more fatalities, raising the death toll to 41,828.
Early in May, Airbnb announced it would lay off nearly 1,900 employees, or 25% of its workforce, after the coronavirus pandemic led millions of customers to cancel travel plans, hitting the company’s revenue.
Coronavirus Exposes Weak Links in Peru’s Success Story
President Martín Vizcarra followed the best advice when the coronavirus arrived in Peru; ordering one of Latin America’s first and strictest lockdowns, and rolling out one of the region’s biggest economic aid packages to help citizens stay home. 
Vizcarra shared detailed health data with the public, rushed to add hospital beds and ventilators and increased testing. With robust public coffers and record-high approval ratings, Mr. Vizcarra’s centrist government appeared well prepared to face the pandemic.
Despite being lauded as a model of disease control, Peru has become one of the world’s worst coronavirus hot spots, plagued with overwhelmed  hospitals and Peruvians fleeing the cities. The crisis has marred Peru’s veneer of economic progress, exposing the deep-rooted inequality and corruption that have thwarted its pandemic response.
“They asked us to stay at home, but a lot of people have no savings so that was impossible. They asked us to wash our hands, but one in three poor households has access to running water,” said Hugo Ñopo, who works for a Peruvian research group, Grade. 
Ñopo said only half of Peruvian homes have refrigerators, forcing many families to return daily to crowded markets: a major source of contagion.
According to The New York Times
“Peru’s tragedy is unfolding amid a broader explosion of the virus in Latin America, which has turned from a haven to an epicenter of the pandemic over the past two months. About 1.5 million people in Latin America have tested positive — and experts say the real number of infections is much higher.”
These numbers are still rising sharply and the worst appears to be far from over. With winter arriving in the southern part of the region and hurricane season in the northern part, the World Health Organization warned this week that adverse weather conditions could lead to a new spike in infections in Latin America and hinder the region’s pandemic response.
Peru has had about 6,000 confirmed COVID-19 deaths and more than 200,000 infections, and experts say these numbers understate the true extent of the pandemic.
In May, the death rate in Peru from all causes was twice as high as the average of recent years, according to data compiled by The New York Times, suggesting a coronavirus death toll two to three times the laboratory-confirmed figure. Many with symptoms die without being tested.
“Results haven’t been exactly what we expected…This isn’t just a health or sanitary crisis, but a social and economic crisis without precedent,” President Vizcarra said last month. 
Peru’s swift descent from regional success story to calamity has demoralized its 32 million citizens and provoked national soul-searching. Years of robust economic growth fueled by mining and agricultural exports, coupled with prudent financial policies, had transformed Peru into a rare bright spot in stagnating Latin America. Under a string of pro-business presidents, millions of Peruvians escaped poverty in this century, allowing them to send children to private schools, install running water or start small businesses.
Pablo Lavado, an economist at the Pacific University in Lima told The New York Times that the lockdown has exposed the fragility of Peru’s economic progress, said. Two decades of economic growth lifted many incomes but yielded few stable jobs and little health care investment, therefore reducing the effectiveness of President Vizcarra’s pandemic measures.
Mr. Lavado added that many Peruvians find themselves being forced to risk catching coronavirus, rather than stay at home and slide into poverty and hunger.
“Here we were congratulating ourselves in Peru for starting to be a middle-class country. But it turns out our middle class is very vulnerable, very fragile,”  he said. 
Another obstacle has been the entrenched corruption that Mr. Vizcarra vowed to tackle when he took office two years ago. Three former Peruvian presidents have spent time in jail in connection with an ongoing bribery investigation, as has the opposition leader. Another former president committed suicide last year to avoid arrest and yet another is imprisoned after multiple convictions for human rights violations, embezzlement and abuses of power.
Argentina Jockeys to Get its Barley into Chinese Beer
Argentina is jockeying to get more of its malt barley into Chinese beer, now that Asia’s mega-economy is locked in a trade fight with its top barley supplier Australia, according to industry sources in the South American grains powerhouse.
As reported by Financial Post, China is the top global importer of malt barley for making pale lagers and other beers, while Saudi Arabia is the top importer of feed barley, which it uses as camel food.
Argentina is expected to export 120,000 tons of barley to China this year, said Agustin Baque, foreign trade chief and farm consultant for export firm Alea y Cia S.A.
“For the next season, if the Chinese maintain import taxes on Australian barley, I think it could double to 240,000 tonnes, maybe more if barley farms in France and Canada have bad crop weather,” Baque said. 
Argentina’s CIARA-CEC export chamber said it was working with the trading companies it represents and the government “to satisfy current and future Chinese demand for high quality barley.”
Earlier this year, China slapped an 80% tariff on barley from Australia- citing allegations of dumping- amid increasing tensions between the two countries.
Most of Australian barley exports went to China before the trade spat. Australia is expecting a 2020/21 barley crop of 9.5 million tonnes and consumes about 3.5 million tonnes domestically, leaving plenty to be exported. Baque is concerned Australia might look to sell some of that to other South American countries.
“Argentina is the biggest exporter of malt barley to the South American market but Australia is very competitive for the next season. So if we don’t negotiate with Chinese buyers we could have a supply and demand problem… For us, the Chinese market is new. But our main client is Anheuser-Busch InBev, which is the biggest player in the Chinese beer market. We are talking with them about exporting to China.” he added.
Bars Closed 
The China-Australia trade dispute is not translating into a big increase in barley sowing this season in Argentina, however. With many bars closed around the world due to the coronavirus pandemic, global beer demand is down.
“Australian barley exporters are contacting Argentine ones, because Argentina has a long list of processing plants and companies authorized to export barley to China,” said the source. “They are trying to introduce a channel to allow Australian exporters to sell Argentine barley to China in order to not lose that market.”
In calendar year 2019, Argentina exported 1.3 million tons of beer barley, of which around 585,000 tonnes went to top buyer Brazil, according to official trade data.
Podcast: Helping Brazilian SMEs with Tax Compliance, Nathan Lustig
In this episode, Nathan Lustig sat down with Vitor to talk about how he became a lieutenant in the Brazilian army and then started working as a business analyst for Nick Faldo’s Golf & Resort Management company. They also discuss how Curitiba’s ecosystem has evolved over the years and how he started Contabilizei– now the largest SME accounting firm in Brazil– when no one believed in his product.
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