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Technology is driving a massive transformation of Latin America

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A friend in London told Verb that countries in Latin America will soon rebound from the pandemic. At the time we were complaining to them about the economic problems in the region, as you do (most of Verb’s team was either born, grew up, or still is in Latin America), but we later checked and our friend was right: the World Bank is forecasting 5 percent economic growth for the region in 2021, and they expect some countries like Panama to grow at nearly 10 percent this year.

If that sounds like the kind of corporate briefing you prepare to rise a country’s sales quota, you got it right: we were working on a report to get international executives ready for the annual regional Avaya event. During the event we learned that the top countries in the world using WhatsApp and social networks for customer service are all in Latin America. According to a survey, over 30 percent of people in Colombia, Brazil, Argentina, Mexico, and Chile say they prefer WhatsApp over the phone to interact with banks, utilities, and retailers (Avaya is a Verb customer).

At the event, Mexican grocery chain Calimax offered one example of how pervasive WhatsApp is in Latin America. The company lets customers order by sending in a picture of their grocery list on WhatsApp. We were shocked by the level of service and wouldn’t stop talking about it. “Everybody in the region is doing it now,” somebody told us quietly. People in Latin America are so used to WhatsApp that they think using it to send a picture of their paper list to order their groceries is nothing special. Are you listening, Trader Joe’s?

Besides corporations, do you know who else has noticed that people in Latin America are using a lot more technology? Venture capital firms. An excellent report by Atlantico VC makes the case for investment in the region much better than anywhere else we’ve seen, starting with the socioeconomic foundation: there are 600 million in people in Latin America, twice that of the U.S. and half that of China, with GDP per capita roughly the same as in China. True, the region is the most unequal in the world, but it has right now a shot at exploiting its “demographic bonus” of a large young population to fuel growth.

What’s the upshot for technology? The Atlantico report uses a clever metric to show it: tech industry market capitalization as percentage of total GDP. In the U.S. the figure is 39 percent. In Latin America it’s 2 percent, and it’s been growing at 65 percent year over year since 2003. In 2010, the top company in Latin America by market value was oil giant Petrobras; last year it was ecommerce giant Mercado Libre. In fact, the ecommerce share of total retail in Latin America was growing at similar rates than in China and India, and faster than in the U.S., and then the pandemic hit. In the first half of last year, ecommerce in Brazil doubled.

It’s not just ecommerce. Food delivery, entertainment, advertising, financial services, even real estate are showing signs of explosive digital growth in Latin America. When the pandemic found some of the countries with the highest internet usage in the world, in a region that already had higher internet and mobile penetration than China and India, it kicked off a giant wave. The Atlantico report calls the impact of Covid-19 in Latin America “The Tech Tsunami.”

Can Latin America surf it? Report authors point out significant social changes are already happening even if the region comes short of its best future. Successful regional startups are turning hundreds of its employees into millionaires who are in turn investing in new projects. Though the region still needs more engineers, more students want to start their own businesses or work in tech. Regulation is an obstacle, though there has been progress with more pro-innovation laws. And while venture capital investment was short of a tenth of a regional GDP point in 2019 (vs. 0.62 percent in the U.S.), it hit a record $4.6 billion that year and continued to grow. According to TechCrunch, regional startups raised over $9 billion in 414 deals in the first half of 2021. 

A different TechCrunch article mentions that a lot of this VC money seems to be from outside the region. It quotes Shu Nyatta of Softbank, who co-leads its $5 billion Latin America fund, with a wonderful take on regional bounty: there’s so much need, that technology can make life a lot better for everyone, instead of just a little better for developed markets people already living in the future. Forget about disruption, startups in Latin America are working on inclusion.

Such a positive message. Like our friend in London, some foreign residents have noted that there seems to be unwarranted pessimism about the economy and the politics inside the region. Not The Economist, which had terrible things to say about the prospects of the two regional giants Brazil and Mexico, but other foreigners discovering Latin America’s treasures. They’ve said that the constant negative view is making locals miss out on opportunities that foreigners would just jump on.

If all sounds too good to be true, remember you need to be optimistic to be in technology. 

Spread optimism, not the virus.