With a population exceeding 600 million, Latin America is the second-fastest
growing mobile market in the world, behind sub-Saharan Africa.
With over 200 million
smartphone users, the newest generation of Latin American tech startups is turning to China for inspiration. Among some of the primary challenges these companies are trying to solve is the integration of the region’s massively under- and unbanked population into the financial system and improving their lives with technology.
‘Historically, Latin America has looked to Silicon Valley and New York for business, but there are innovations in China that could be even more applicable to the Latin American reality. When you go to China, you see what’s going to happen in Latin America in five more years. Today, we look at China. We look at Meituan, Alibaba, and Tencent to see what we can do in the future.”
Here’s a deeper look at how Latin America’s technology startups are following in China’s footsteps:
1.Mobile-first approach to payments
As the largest e-commerce market in the world, China is the obvious leader in mobile payment technology. According to a People’s Bank of China report, Chinese mobile payments hit a new record high in 2018 with 60.5 billion
mobile payment transactions, or a 61.2% annual growth in the number of mobile transactions.
Similarly to China, mobile payments are booming in Latin America. As traditional banks and financial institutions struggle to meet the digital needs of Latin American consumers, significant opportunities have emerged for mobile and fintech startups. According to Crunchbase,
the Latin American payments sector is one of the fastest-growing in the world: expected to achieve an average annual growth of 8%
over the next five years, second only to the Asia-Pacific region.
2.More entrepreneurs are staying in Latin America
As economic relationships between Latin America and the U.S. remain uncertain, China has become an increasingly important partner for Latin American businesses looking for partnerships and investment.
Trade between China and Latin America has increased from $12 billion
in 2000 to nearly $306 billion
in 2018. Although the bulk of these investments were in energy and infrastructure projects, a number of investments in Latin America’s technology sector broke records
This new influx of capital, paired with the increasing difficulty of taking one’s startup to Silicon Valley, is making it more appealing for entrepreneurs to stay in Latin America and focus on innovating and solving problems in their home countries.
Likewise, Chinese technology talent is not only heading back to China, but is growing there in record numbers. According to the Ministry of Education, 432,500
- nearly 80% of Chinese overseas students- recently chose to go back to China after completing their studies.
The Chinese tech scene is benefiting from the mass influx of “Sea Turtles
”- a name given to Chinese returnees who studied abroad in the US- in addition to the increase of a young, tech-savvy middle class. The Latin American middle class has been growing steadily
over the past few years, driving growth in all consumer categories. This expansion has not only been good for business, but has proven to be essential in keeping and increasing local tech talent.
For example, Guadalajara
is part of Mexico’s “Silicon Valley” and sees 85,000
graduates in IT each year. Today, São Paulo, Brazil is home to more than 2,000 startups
3.New Latin America-China Partnerships
As ties between Latin America and China become stronger, it has becoming increasingly feasible that these two regions will be the homes to the tech hubs of the future.
Although Silicon Valley startups still attract more capital today, startups in cities like Beijing and Shanghai in China and São Paulo and Medellín in Latin America are generating high-growth companies, raising mega-rounds
of capital, and solving crucial problems in their respective developing markets.