Can Chinese Fintech Jump-start Latin America Digital Finance?

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This week, ICBC unveiled EPay, an app that will allow clients in Hong Kong to make electronic payments. The worlds largest bank by assets under management joins Alipay, Union Pay, and WeChat Pay in a very mature, and already-crowded, $15t Chinese e-payments market. The Chinese digital financial services (DFS) marketplace is dominated by Alibaba’s Ant Financial  — which now has greater valuation than Goldman Sachs — with Tencent’s WeChat Pay hot on its heels, leveraging WeChat’s ubiquity.

In striking comparison, the Latin American mobile payments sector has struggled to get off the ground, despite the potential market. 70% of Latin Americans do not have a bank account, but only 15m of that 340m market have a mobile money account. Platforms like Digicel’s MonCash in Haiti and Giros Tigo in Paraguay are the exception, not the rule. Even Brazil’s PagSeguro — one of the few e-commerce success stories in the region — saw its stock drop 13% this week on concerns that traditional merchant acquirers are encroaching. You’d think that ICBC — with a significant retail presence in Argentina — would be the perfect supporter of a DFS program in the region. But Chinese tech and financial firms have failed  to capitalize on the opportunity along with their Latin American counterparts.

The hurdles to DFS in Latin America are not the technology. While the value of QR codes versus near-field communications (NFC) is not a settled discussion, WhatsApp alone proves that Latin America is not afraid to adopt technology when it makes things easier. And economic struggles in Argentina and Venezuela have spurred bitcoin in those countries (and we won’t touch on the Petro). But as we tell our clients looking at the space: the rule of thumb is that successful digital financial services programs are 80% operations and 20% technology.

Latin America lags in fintech in large part because the incumbent banks have long seen it as a threat, not an opportunity. Miguel Arce of Pagos Digitales Peruanos — the company behind Peru’s BIM mobile wallet — notes that banks are vital to fintech, allowing users to get cash into and out of the mobile money system. Support from the Asociación de Bancos del Perú (ASBANC) will be key to whether BIM takes off as an alternative to cash.

The fragmentation of DFS clients across thirty-something jurisdictions doesn’t help, either. The Spanish incumbents BBVA and Santander could be region-wide champions of digital payments, but haven’t successfully launched a product. Where they have acquired — such as with BBVA’s acquisition of the US’ Simple in 2014 — they have struggled. Itaú, with a franchise in Argentina, Chile, and Mexico beyond its home Brazil, is the only regional champion likely, but hasn’t pushed into the space. The region's financial institutions may have already missed their chance. It may be up to one of the homegrown tech firms, such as Mercado Libre, to address the issue.

With Ant Financial and Tencent locked in pitched battle domestically, Latin America represents up to a half a billion potential new users, with higher income than at home. Policymakers in Beijing are pushing them to make serving Chinese nationals in Latin America a priority, but they are now eyeing the underserved financial clients in the region. Ant Financial had been eyeing MoneyGram as an entrée into Mexico (and the US) before the Trump administration put the kibosh on it, and subsequently entered into a partnership with Openpay. It catches up with Samsung Pay, which launched in Mexico last year.

But while the M&A strategy has served Chinese tech firms in the past, across a fragmented Latin America market it won’t be a one-size-fits-all solution. Firms will need boots on the ground to handle regulatory issues, operations, as well as an effective sales team to drive adoption. While they may see Latin America as an untouched market for fintech, Chinese tech firms may discover that the “capital light” approach that they have used in the past won’t be sufficient.

Top Stories

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Morales cumple reuniones con sectores aeroespacial, de transporte y petroquímica en China — La Razón
Visita de Morales a China inyectará nuevos impulsos al desarrollo de relaciones sino-bolivianas, dice embajador chino — Xinhua
China convierte a Bolivia en socio estratégico y se abre a su quinoa y café — 14 y Medio
Texto íntegro de la declaración conjunta entre China y Bolivia sobre el establecimiento de la asociación estratégica — Xinhua
Bolivian President Evo Morales stopped in Beijing on his way home from the World Cup, where he and Chinese President Xi Jinping signed deals brining Bolivia into the Belt and Road Initiative and a line of credit from China EXIM for urban security, among other items.

Gigante eléctrica china concreta ingreso a Chile con compra de central hidro en el Biobío — Diario Financiero
Gigante asiático compra proyecto hidroeléctrico en la zona de Alto Bío Bío — Bio Bio
China Three Gorges Corporation has bought the proposed $240m, 90MW Rucalhue hydroelectric project in the Bío Bío region of Chile.

China scores in Latin America — FT
China amplia presença na AL, do setor financeiro ao futebol — Valor
The FT’s JP Rathbone referenced our World Cup piece last week in his weekly LatAm Viva column:
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China — LAC

China's State Power to bid for Brazil hydroelectric dam: sources — Reuters
China’s State Power Investment Corp is going to submit a bid for Brazil’s fourth-largest hydroelectric dam, the 3.6GW Santo Antonio, as soon as next month.

MoU signed for US$104m industrial park — T&T Guardian
China team in T&T to sign MoUs — T&T Guardian
Chinese delegation visits La Brea pitch lake — T&T Newsday
Young: Chinese delegation arriving Saturday — Loop TT
Beijing Construction Engineering Group (BCEG) and Trinidad’s Evolving Tecknologies and Enterprise Development Company Limited (eTecK) have signed an MOU for development of the $104m Phonenix Park Industrial Estate. BCEG has also signed a distribution agreement with Lake Asphalt of TT (LATT). Trinidad and Tobago also hope the five Chinese banks will establish operations in the country.

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Fiscalía Nacional Económica inicia investigación por venta del 24% de SQM a empresa china — Bio Bio Chile
Regulador chileno investiga ingreso de china Tianqi a minera SQM — América Economía
Chile antitrust regulator to probe Tianqi purchase of SQM stake — Reuters
Chilean competition watchdog the National Economic Prosecutor (FNE) has begun an investigation in Tianqi Lithium’s acquisition of of 24% of lithium miner SQM, following economic development unit CORFO’s blocking of the deal earlier this year.

Governo trabalha para evitar que embargo chinês ao frango se torne definitivo — Istoé
Governo trabalha com setor privado para suspender embargo chinês a frango brasileiro, diz ministro — DCI
The Brazilian government is looking to regain access to the Chinese chicken market for its exporters following last week’s antidumping tariffs. The move is seen as being unrelated to the US-China trade war.

Chanceleres da Argentina e Uruguai querem acordo de livre comércio com a China — O Globo
Mercosul e China devem retomar negociações para acordo comercial — O Globo
Mercosur: Cancilleres apuntan a China en el nuevo semestre del bloque — Ultima Hora
Sin Macri, Mercosur discute el grado de influencia china que permite la región — El Cronista
Con el acuerdo con la Unión Europea paralizado, Jorge Faurie destacó las relaciones con China — Clarín
Los países del Mercosur miran hacia China ante el retraso de la firma del acuerdo con la UE — Expansión
Mercosur busca consenso para acercarse a China y se muestra preocupada por demora en acuerdo con la UE — América Economía
Macri apuesta con Vázquez por acuerdos de Mercosur con China, Japón o Canadá — La Vanguardia
Uruguay se beneficiará de TLC con China según informe — Xinhua
China: la mejor opción frente a los condicionamientos del FMI — Bae Negocios
With the slowdown of free trade agreement (FTA) discussions with the European Union (and with the Canada EU FTA held in the balance by European populist movements), Argentina and Uruguay are pushing Mercosur to pursue FTAs with China, Japan, and Canada. Let’s see what Brazil says.

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No embate entre EUA e China, Brasil só tem a perder, diz executivo — Exame
Guerra comercial entre EUA e China piora cenário econômico para Brasil — Valor
Brasil perde com disputa comercial de EUA e China — Folha
La guerra comercial China-EEUU se traduce en pérdidas en las bolsas de Latinoamérica — el Economista
Peso cae por tensiones comerciales entre EU y China — El Sol de México
3 efectos en México por la guerra arancelaria de EU y China — Expansión
México enfrenta riesgos, pero puede ganar con disputa entre EU y China — El Economista
Se asoma guerra comercial entre Estados Unidos y China — Telemundo
Não está claro se Brasil conseguirá nos substituir na soja para China, diz Ross — EM
Volatilidade e protecionismo são riscos para economias da América Latina, diz OCDE — O Globo
Estos son los efectos que puede traer a México la guerra económica de EU y China — Expansión
EU vs. China y México: la muerte del liberalismo — Dinero en imagen
Recognition from Latin American observers that the trade war between China and the US won’t exactly be a win for them.

Business Is Booming in the Panama Canal — Independent Reporter
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Viña Requingua refuerza sus planes en China y busca crecer en unas 500 nuevas hectáreas — Economía y Negocios
Experto dice que China aporta "tremendo mercado" para vinos de Chile — Xinhua
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Perú se propone duplicar llegada de turistas chinos: Descubre cómo lo hará — Portal de turismo
Perú incentivará llegada de más turistas chinos — El Peruano
Perú se posiciona con fuerza en mercado chino con intensa campaña digital — Portal de turismo
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Ante el proteccionismo, México debe profundizar su compromiso para diversificar relaciones comerciales — El Universal
Con o sin TLCAN, México debe comprar insumos a China, India o Bangladesh: IMCO — El Economista
China quiere seducir a exportadores mexicanos en tensión con EU — Expansión
With the status of NAFTA up in the air, and the potential for populists on both sides of the border, Mexico needs to look for new markets, including China, India, and Bangladesh.

La automotriz china JAC llega en septiembre a la Argentina con cinco modelos de autos — iProfesional
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Senado aprova novo embaixador do Brasil na China — Senado Federal
Investimentos chineses no Brasil devem continuar crescendo rapidamente — Senado Federal
Paulo de Mesquita has been appointed as Brazilian ambassador to China; he expects Chinese investment in Brazil to continue to grow rapidly.

China redujo los aranceles para la importación de 1.449 productos nacionales — Infobae
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Enviado chino ante ONU habla de proyectos de Iniciativa de Franja y Ruta en América Latina — Xinhua
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China continues to use the Belt and Road Initiative as a frame for looking at infrastructure projects in Latin America.

Bolivia, Brazil, Paraguay, Peru agree framework for “bi-oceanic railway” — GCR
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La preocupación en EU por China en Latinoamérica — El Heraldo de México
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Chin-stroking on how the US will deal with China in Latin America.

Google invertirá 550 mdd en gigante chino JD.com — Forbes México
Google is investing $550m in Chinese e-commerce platform JD, which could allow it to expand beyond its current markets, including to Latin America.

Mercado chinês vai acelerar a educação de empreendedorismo e negócios no Brasil — Exame
The challenge of the growing Chinese market and potential Chinese partners will accelerate entrepreneurship and business in Brazil, according to National Services Confederation head Luigi Nesse.

Learning Latin America: China’s Strategy for Area Studies Development — The Inter-American Dialogue
Our friends at the Dialogue out with a report on how China is going to develop academic area studies programs.

Carne argentina, producto boutique en China y Japón — Clarín
Almost 50% of Argentina’s beef exports go to Asia, but it still lags competitors like Australia, Brazil and New Zealand in exporting to China, so there’s plenty of opportunity.

Embajada de China en la RD: Fu Xinrong — Listin Diario
Briunny Garabito Segura, embajador en China — Hoy
The Dominican Republic and China have announced Ambassadors, Briunny Garabito Segur and Fu Xinrong, respectively; both are career diplomats for their countries.

Las violaciones de derechos indígenas de las inversiones chinas — El Pais
A look at one of the issues surrounding increased Chinese investment and companies in Latin America - the impact on indigenous communities. This piece lists some of the projects in South America that have been a source of tenpin between Chinese firms and indigenous groups. 

Firmas de China y Colombia explotan ilegalmente oro en la Amazonía con la fachada de cooperativas — El Deber
Relatedly, Chinese and Colombian firms are using cooperatives in Bolivia to illegally mine gold along the Kaka and Beni rivers.
 

Interview: China's growth to benefit Chilean economy, says Chilean entrepreneur — Xinhua
Chile’s mining magnate Andronico Luksic sees continued opportunity for his country selling into the Chinese market.

Feature: Chinese entrepreneurs see huge potential in Cuban market — Xinhua
A report from the first-ever Cuba-Zhejiang business forum, held in Havana this week.

Korea — LAC

Hyundai Motor to Ramp up Vehicle Production in Brazil — Business Korea
Coming off its break-up with local company Caoa, Hyundai has announced it is going to expand production at its São Paulo plant from 180,000 vehicles to 220,000 this year.

Corea comparte su experiencia en gestión de recursos hídricos — KBS Radio
S. Korea offers e-gov't training to senior officials from Central, South American nations — Yonhap
South Korea and the Inter-American Development Bank hosted an event for public officials from Latin American on e-government and how to manage water resources more effectively.

Japan — LAC

AFM realizará activaciones en Japón — APEAM
Mexico’s Avocado exporters association (APEAM) is marketing their wares to Japan next week.

India — LAC

India looks to boost ties with Latin America — Hindustan Times
India aims closer ties with Latin American region with President Kovind's visit — The Week
Indian President Ram Nath Kovind visited Cuba and Suriname this week, in an effort to boost ties with the region.

GCC — LAC

Dubai Launches New Trade Tango with Latin America — Venture Magazine
A summary of the Dubai Chamber of Commerce and Industry (DCCI) outreach to Latin America, including the opening of an office in Brazil last year, and plans for offices in Argentina and Panama this year.

ASEAN & Oceania — LAC

New Zealand: Exclusive avocado access to Australia under threat — Fresh Plaza
Thanks to the Trans-Pacific Partnership, Mexico, Peru, and Chile are looking to challenge New Zealand’s hold on the Australian avocado market.

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