An entrepreneurial culture, a youthful population and, paradoxically, still-high social inequality, are driving business opportunities throughout Latin America. Such local businesses may make the region more resilient in the face of increasingly protectionist policies that may be coming from Washington.
Rodrigo Villar, founding director of New Ventures Mexico, says the apparent hostility towards Mexico from the new U.S. administration is not a threat. New Ventures trains and invest in startups delivering goods and services to Mexico’s poor and middle class. “We’re investing in education, health, housing,” Villar told ImpactAlpha. “They’re all very local.”
The growing crop of investors and entrepreneurs that are tuned in to these trends will gather later this month at the seventh annual Latin American Impact Investing Forum in Merida, Mexico. Villar and New Ventures will host investors, entrepreneurs, foundations and policymakers to focus on the role of philanthropy in building the sector, how to engage corporate strategic investors, alignment with faith-based initiatives and universities as a talent pipeline.
In 2014 and 2015, impact investors placed $1.3 billion into Latin America. Most of the investment went into early-stage companies, microfinance institutions and agricultural cooperatives. Mexico has attracted $400 million in impact investment, followed by Brazil with nearly $200 million. Altogether, the region attracted $14.3 billion in private equity and venture capital in that period, second only to emerging Asia among emerging-market regions.
Latin America’s long-term economic prospects are driven more by demographics, business acumen and social justice than by anything the Trump administration might do. If anything, incidents like the recent dust-up between the U.S. and Mexico presidents may help unite the region.
By one statistic Latin America is the world’s most unequal region: The richest 10 percent of people own 71 percent of the region’s wealth. Countries also face challenges in primary education, access to healthcare and many areas are particularly at risk to the effects of climate change.
But Latin America’s demographics are working in its favor. Falling mortality and fertility rates over the past half century have left the region with a growing population of working age adults. That growth will continue through 2050, a “demographic dividend” that gives Latin America an historic opportunity to boost productivity and invest for long-term, inclusive growth.
“If the U.S. is going to export all the talent back to Mexico, we’ll take it,” says Villar.
Fund’s like Ignia, based in Monterey, demonstrate the investment opportunity in Mexico’s emerging middle class. Ignia has invested $200 million in companies supporting upward economic mobility. In Guatemala City, the venture investor E 10 , the family office of Juan Jose (“JJ”) Estrada, has provided seed capital for companies like Kingo, which brings renewable energy to rural communities.
International investors Calvert Foundation and ImpactAssets have invested tens of millions microfinance, agriculture and other sectors. The World Resource Institute’s Initiative 20×20 has secured commitments of $855 million from impact investors and other funders for land restoration projects in Latin America.
Other sectors seeing growth include financial services in Mexico, Brazil, Chile and Peru, and science and healthcare R&D in Brazil, Mexico and Argentina. The digital economy across the board is strong. Manufacturing is up in Mexico, but has been hit hard in Argentina and Brazil, leaving industrial growth flat for the region, according to Deloitte.
“We have increasingly competitive labor,” Villar says. “We’re not just a manufacturing hub.”
ImpactAlpha is a media sponsor of the FLII.