ImpactAlpha Latin America | February 26, 2024

ImpactAlpha Latin America: Growing the impact ecosystem

Dennis Price

Follow the money and people powering Latin America's impact economy.

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ImpactAlpha Editor

Dennis Price

Saludos, Agents of Impact! 

👋 Welcome to ImpactAlpha Latin America, our specialized monthly newsletter bringing you year-round coverage of the news, voices and dealmaking powering the impact economy in Latin America and the Caribbean.

ImpactAlpha has been telling Latin America’s impact investing stories for over a decade. We’re ramping up to tell more stories – and engaging you to reach further and dig deeper, with the help of our launch partners FLIINew VenturesAlternaLatimpactoAliança pelo Impacto and Pro Mujer.

Our first edition coincides with the 14th edition of the Latin America Investing Forum, which kicks off this week in Mérida, Mexico (are you going? check out 36 hours in Mérida“). You’ll also find us on the ground at Pro Mujer’s GLII Forum Latam in June, Latimpacto’s Impact Minds in September and Alterna’s FLII Central America and the Caribbean in November. Let the fiesta begin! 

A few ways to contribute:

  • Tell your story. Send deal news, fundraises and other stories to me or Jessica Pothering, our emerging markets editor. Sound a call to action or demonstrate your thought leadership by submitting a compelling op-ed.
  • Introduce your peers. Tell all the Agents of Impact you know to sign up for ImpactAlpha Latin America.
  • Partner with us. Become a sponsor of ImpactAlpha Latin America. Get in touch.

In this month’s newsletter:

  • Showcasing Latin America’s impact ecosystem 
  • Structuring flexible and blended loan products
  • Inclusive lending in Mexico
  • Blending finance in Brazil

Ok, let’s get to it. – Dennis Price

Featured: Growth Markets

Latin America’s impact ecosystem, built over decades, is primed for takeoff. Impact investors have built a robust Latin American ecosystem of asset owners, fund managers, entrepreneurial support and policy expertise as impact assets under management and venture capital and other investments in the region have surged in the past decade. In addition, public funding is increasingly leveraging private capital, blending finance for Latin American efforts to address Sustainable Development Goals such as poverty reduction, climate resilience and access to clean energy and quality health care. That growing impact investing ecosystem will be on display this week at the Latin America Impact Investing Forum, known as the FLII, the region’s annual confab in Merída, Mexico. Top of the agenda: Nature-based solutions, AI for good and European investments in Latin America’s progress. “The problems and solutions are here, in the Global South,” says FLII’s Carolina Puerta, even if financial resources remain concentrated in the Global North. 

  • Impact infrastructure. Assets allocated to impact in the region have grown at an annualized rate of 21% over the last five years, second in emerging markets only to East Asia, according to the GIIN. Nearly 300 funds now target Latin America and the Caribbean, including 89 funds, with $6 billion in assets, that have an exclusive focus on the region, reports from research firm Tameo. At least 18 Latin America-focused funds have actively raised capital over the last 18 months, according to ImpactAlpha’s Liist, including Colombia-based EWA CapitalMaya Capital in Brazil, Amplifica Capital in Mexico, Acceso Impact Fund in Guatemala, and Impaqto Capital in Ecuador. And the region now boasts seven National Advisory Boards, or NABs, for impact investing, including for Argentina and Uruguay, Brazil, Colombia, Mexico, Central America, Peru and Chile.
  • Brazilian showcase. This year, Brazil assumed the presidency of the G20 and next year will host COP30 in Belém, Pará. “The international agenda and Brazilian leadership present significant opportunities for the impact investing industry,” Vox Capital’s Gilberto Ribeiro told ImpactAlpha. President Luiz Inácio Lula da Silva has given Brazil’s impact economy a boost. Last year, his administration issued an updated National Impact Economy Strategy, or Enimpacto, that aims to boost impact investing tenfold to $120 billion over ten years. Last year the country issued $2 billion in sovereign green bonds; roughly three-quarters of the buyers were international investors in Europe and North America. Says Vitoria Junqueira of Aliança pelo Impacto, the Brazilian advisory board for impact investing, “we are well-positioned to support the implementation of solutions for societal and environmental transformations.”
  • Keep reading, “Latin America’s impact ecosystem, built over decades, is primed for takeoff,” by Dennis Price on ImpactAlpha.

Other must-reads on ImpactAlpha:

Three Impact Voices: Flexible and Blended Capital

Designing catalytic loan products for impact companies in Latin America. Mexico City-based CO_Capital began in 2019 offering off-the-shelf long-term credit, including revenue-based financing, to stable enterprises looking to scale. The investment firm soon found that long-term loans did not fit the needs of early-stage enterprises and revenue-based financing was too complex and uncertain. The redesigned strategy, detailed by CO_Capital’s Alberto Gómez-Obregón in a guest post, includes term-loans, with a mezzanine-like risk tolerance, flexible terms like an interest-only grace period. A “first-loss” guarantee from the U.S. International Development Finance Corp. allows CO_Capital to take on risk while protecting LP capital. With the new approach, says Gómez-Obregón, “we do not have to worry about exit and we can reach ‘real-economy’ companies,” including cooperatives.

How Estímulo is blending finance for Brazil’s small businesses. Since its launch as a small business relief fund in the aftermath of COVID, São Paulo-based Estímulo has disbursed $40 million in credit, supporting over 3,400 small and medium enterprises, predominantly in low-income regions. In 2021, the firm broadened its financing reach by adopting a blended finance structure with the creation of a credit rights investment fund that could accept both philanthropic contributions and investment capital seeking financial returns. By blending capital, writes Estímulo’s Lucas Conrado in a guest post, the fund “offers small businesses more favorable terms than those typically available through traditional financial institutions, which often categorize these businesses as high-risk.”

Five reasons Latin America and the Caribbean are attracting impact investors. Latin America and the Caribbean is key to the global energy transition. The region contributes one-sixth of the world’s food production, contains roughly 40% of the world’s biodiversity and hosts almost half of the world’s forests. Already, as much as 60% of electricity in Latin America and the Caribbean is generated from renewables. Investors are paying attention, writes Carolina Suárez of Latimpacto in a guest post.Roughly half of investors that responded to Latimpacto’s annual impact survey invest in climate change and the environment. And results are mounting. Rural enterprises backed by SocialAlpha Investment Fund, for example, achieved 27% average revenue growth in 2022. With investments in the region, writes Suárez, “investors can mitigate climate change and preserve the region’s natural resources for future generations.”

Dealflow: Inclusive Fintech

Blue like an Orange provides $18 million in financing to Mexican lender Fuentebuena. Monterrey-based Fuentebuena works with more than 150 municipalities in Mexico to provide payroll loans to unbanked and underbanked city workers. Separately, the lender offers ride-sharing drivers lease-to-own financing for vehicles that run on natural gas rather than crude oil-derived gas and diesel. Blue like an Orange provided $18 million in debt financing to support the expansion of Fuentebuena’s worker loan and vehicle leasing books. The company has deployed over 2.75 billion Mexican pesos (around $160 million) to more than 130,000 borrowers. Fuentebuena promotes “positive social impact in Mexico by increasing access to finance and promoting self-employment opportunities for underserved populations,” said Rashad Kaldany of Blue like an Orange.

  • Mexico footprint. Fuentebuena is Blue like an Orange’s eighth deal in Mexico since the fund launched in 2017 to unlock mezzanine debt for businesses advancing the UN’ Sustainable Development Goals in Latin America. The firm’s Mexico portfolio includes Financiera Contigo, which provides loans and insurance to female micro-entrepreneurs from rural and marginalized communities. Clinicas de Azucar, based in Monterrey, operates a large network of diabetes clinics for low-income patients.
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Deal spotlight: ‘Missing middle’ lending to social enterprises in Latin America. Social enterprises number more than 10 million, bring in $2 trillion in revenues each year and employ 200 million people. To have even bigger economic and social impact, they need an additional $1.1 trillion in capital. Impact investor and accelerator NESsT is looking to put a small dent in that capital gap for Latin America’s frontline social entrepreneurs with a patient, low-cost revolving loan fund. Its Lirio Fund notched a $500,000 program-related investment from Sorenson Impact Foundation (disclosure: Sorenson Impact Foundation also is an investor in ImpactAlpha). The fund is targeting a $20 million raise to help 80 social enterprises in the region “grow faster and more sustainably,” NESsT’s Chad Sachs told ImpactAlpha.

Other recent deal activity in the region:

  • Climate finance. CARICOM Development Fund anchored a Caribbean climate resilience fund.
  • Circular economy. Impaqto Capital backed Sinba’s recycling services in Peru… InMotion Ventures invested $1.2 million in Energy Source, a Brazilian lithium battery recycling venture.
  • Economic inclusion. In Mexico, Techreo raised $3.4 million in bridge financing to expand financial services… Brazil’s Traive raised $20 million for its farmer finance tech. 
  • Energy transition. Squared Capital will invest up to $400 million in Brazil’s Origo Energia for the construction of over two gigawatts of distributed solar generation projects… IDB Invest directed $100 million to modernize Jamaica’s electricity grid.
  • Independent media. Media Development Investment Fund invested in elDiarioAR, an independent media outlet in Argentina that focuses on social, gender, environmental, human rights, climate and poverty issues.

Get in the Game

💼 Step up

  • Latimpacto seeks a cultural fund coordinator in Bogotá. 
  • Acción Emerge is hiring an investment officer and an associate of program management and operations in Bogotá. 
  • Global Partnerships seeks a portfolio director in Bogotá.
  • Acumen Latin America is looking for a portfolio analyst in Bogotá. 
  • COMFAMA is searching for a gerente de movilización in Antioquia, Colombia.
  • Alianca/B Lab needs a results optimization assistant in São Paulo.
  • Alterna is hiring an executive coordinator for la PiiC.
  • VIWALA is looking for a senior investment analyst based in Mexico City.
  • Kaya Impacto seeks a senior or associate manager in Mexico City.
  • Ayuda en Acción is hiring an impact investing associate in Mexico City, a director/a Pais in Lima, and a climate innovations program officer in Tegucigalpa.

SUBSCRIBER BENEFIT: Visit ImpactAlpha’s Career Hub for more impact investing jobs. Contact us for job postings.

🤝 Meet up

Don’t miss these upcoming ImpactAlpha partner events:

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🏆 Level Up

  • Alterna invites applications to its Guatemala-based Impact Fellowship Program for young professionals seeking to accelerate a meaningful career and become global agents of change. Apply today.
  • Aspen Network of Development Entrepreneurs, with support from IDRC, is funding six research projects on women in clean energy in Latin America and Sub-Saharan Africa. Submit your proposal.
  • Women In Energy for Equality invites women leaders in the energy sector across Latin America to register for an informational webinar on Tuesday, Feb. 27 at 10am. Register now.

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