Oftentimes at tech events, when companies pitch the breadth of their market, or investment opportunities, their Powerpoint presentation misses Latin America entirely. It’s not that they simply forget to mention the 639 million-populated continent—it’s not on the slide at all. It’s erased.
American investments in Mexico have increased in the past few years, and cross-border initiatives have cropped up in Mexico’s major tech hubs like Mexico City, Guadalajara and Tijuana. But its southern neighbor aside, U.S. investment into LatAm has been somnolent. It took until 2012 for accelerator 500 Startups to bring two companies—Chile’s Welcu and Argentinians Wideo—to the States.
Today the field is far more competitive. Y Combinator, Techstars and 500 Startups all have significant footprints on the South American continent. Last year Andreessen Horowitz-backed Rappi, a delivery app, became Colombia’s first unicorn when it raised almost $400m last year. Brazil-founded payments firm Brex, funded by, among others, Peter Thiel, is now worth around $1.1bn.
Still, American investment in Latin America languishes. And with an Asian investment boom taking shape, it may be too late to play a commanding role. Similar to their flourish in southeast Asian investments, China’s biggest players are now setting their sights on LatAm.
Tencent recently invested $180m in Brazilian fintech unicorn Nubank, while Didi Chuxing bought Brazil’s 99 Taxis. Huawei is installing fiber optic networks across Mexico—something that will no doubt alarm U.S. Homeland Security—and Alibaba has been studying a wholesale entry onto the continent for years. China spent almost $90bn in Latin America between 2005 and 2016 across all industries. In 2015 it announced a deal to double trade to $500bn by 2025.
Japan’s SoftBank this March announced a $5bn investment vehicle will pick up late-stage startup talent in Latin America. That dwarfs the $1.5bn pumped into the entire continent’s ecosystem last year.
A lion’s share of that cash will be pumped into Brazil, which is by far the continent’s best tech performer. That is no surprise given the lusophone nation comprises around half of South America’s total landmass and almosy half its population. Brazil’s government, while politically volatile, is technologically forward-thinking—and has launched a raft of AI, blockchain and IoT plans.
Mexico is turning into a bona fide tech destination. Colombia, shorn of the violence that characterized its 1990s, is booming too: Medellín, once a drug stronghold, is now a startup haven, and Bogotá has piled almost $400m into the industry there. Argentina’s economy is wavering but firms like Technisys and and MercadoLibre are winning millions of dollars in venture funding.
Latin America’s population is young—163m are aged between 15 and 29—and very online: it has 415m smartphone users. The cost of entry for U.S. investors is still relatively low, though SoftBank’s entry will no doubt push prices up. The question is: why are American VCs so reluctant to bet on a large and relatively stable region—in its own hemisphere, no less—that, small outliers aside, speaks Spanish and Portuguese.
Forget the political costs of leaving LatAm off the economic map (just look to Africa for an example of how American insularism has given China a free run at fiscal and political dominance). Latin America is a vibrant region with great talent, crying out for capital with which to scale. Why are North America’s moneymen and women so reluctant to get out their wallets?