“The games are easy. It's what you do between games that wears you out.” - Mychal Thompson (Bahamian NBA player)

MARKETS

October 31, End Of Day

• Argentina
  • S&P MERVAL Index = 1,848,744.26 (YTD = 98.95%)
• Brazil
  • BOVESPA Index = 129,713.33 (YTD = -3.33%)
• Chile
  • S&P IPSA Chile = 3,546.96 (YTD = 2.29%)
• Colombia
  • MSCI COLCAP = 1,358.46 (YTD = 13.66%)
• Mexico
  • IPC Mexico BMV = 50,661.05 (YTD = -11.72%)
• Peru
  • S&P/BVL Peru = 30,470.47 (YTD = 17.37%)

BUSINESS

Digital financial services = Financial inclusion?

The adoption of digital financial services in Latin America is increasingly viewed as a critical step toward enhancing financial inclusion, particularly for low-income individuals. A recent research explore the potential and actual impacts of digital bank accounts and digital payments on this demographic, offering key insights into both the benefits and limitations of these technologies:

1. Efficiency Gains Through Digital Payment Systems

• Reduction in Disbursement Errors: Transitioning from cash payments to direct deposits in digital bank accounts, as observed in Colombia's "Ingreso Solidario" program, significantly reduced payment errors and increased access to government benefits. The shift led to a 7.3 percentage point increase in the likelihood of receiving payments digitally.
• Cost Efficiency: The intervention highlighted that direct deposits are more cost-effective, reducing the transaction costs by 20% compared to traditional cash payments, which is a notable advantage for both beneficiaries and implementing agencies.

2. Impact on Financial Well-Being

• Bank Account Ownership: The encouragement to switch to digital payments led to a 6.8 percentage point increase in bank account ownership and a 7.9 percentage point increase in digital savings account ownership. However, this did not translate into significant improvements in overall financial well-being, such as increased savings or trust in financial institutions.
• Financial Inclusion vs. Financial Well-Being: While the intervention succeeded in improving financial inclusion by increasing access to formal financial products, it did not lead to substantial changes in spending, savings, or financial stability among low-income households.

3. Challenges in Reaching Financially Marginalized Groups

• Adoption Barriers: The most financially marginalized individuals, who stood to benefit the most from digital banking, were less likely to adopt the new technology. The intervention revealed that those with limited digital literacy or financial history were less responsive to encouragement efforts, despite facing more significant disbursement frictions.
• Policy Implications: The reports suggest that light-touch interventions, like simple encouragements, may not be sufficient for individuals facing high barriers to adopting digital financial technologies. A more tailored approach, potentially including comprehensive financial education and support, might be necessary to effectively integrate these populations into the financial system.

These findings underscore the potential of digital financial services to improve the efficiency of government transfers and increase financial inclusion. However, they also highlight the challenges in translating increased access to financial products into broader financial well-being, particularly for the most vulnerable populations. For policymakers, these insights suggest that while digital bank accounts are a step in the right direction, additional measures may be needed to fully realize the benefits for low-income individuals

Fundraising picks of the week

FeedVax: Animal farming is a $2,3T industry that has a $300B loses due to diseases. There are two bad alternatives to prevent diseases: injectable vaccines and antibiotics. The new way to solve these problems → Oral vaccines. Get to know the case here.

‍Quantum: Their vision is to provide a comfortable, safe, and 100% electric transportation solution. They have achieved significant milestones with over 400 units sold across 5 countries. Their vehicles are 80% cheaper to operate than gasoline cars. Get to know the case here.

Clinspace: Clinspace is connecting healthcare professionals with clinics that have available spaces. This company is tackling the inefficiencies of healthcare space utilization with a platform that offers over 800 office space options. Get to know the case here.

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Dive deeper into other fundraising firms in LatAm here.

CURRENT AFFAIRS

Uruguay: Uruguay is set for a tight presidential run-off on Nov. 24, after center-left candidate Yamandu Orsi led the first round but fell short of a majority. Conservative candidates Alvaro Delgado and Andres Ojeda split the right-leaning vote, with Ojeda now backing Delgado. Voters also rejected a pension reform referendum that aimed to lower the retirement age and replace private schemes with a public model, a proposal that had stirred market concerns. The second round will pit Orsi's progressive Broad Front against Delgado's coalition, making for a closely contested finish.

Panama: The Panama Canal's net income rose 9.5% to $3.45 billion in the last fiscal year, despite severe drought conditions that temporarily reduced daily ship transits. Operational adjustments, including a 5% cut in costs and a new reservation system, helped offset the impact. The canal handled 423 million tons of cargo but saw average daily ship transits fall from 36 to 27.3. To address future water scarcity, Panama is advancing an $8.5 billion infrastructure plan, including a $1.6 billion reservoir project on the Rio Indio river.

Brazil: Azul Airlines secured up to $500 million in new financing from bondholders to strengthen cash flow and reduce debt. The deal includes $400 million in immediate funding and a potential $100 million if cost reductions are achieved. An $800 million debt-for-equity swap is also in place, allowing bondholders equity if Azul meets cash flow targets. Azul’s shares rose over 10% on the news, reflecting market optimism.

FURTHER READING

Check our recently published insights here. Recent post:

🛡 Exploring the Rise of Insurtech in Latin America

Insurtech is revolutionizing the insurance industry in Latin America with a notable 18% increase in funding in 2022, totaling $219 million. This growth, primarily led by Brazil, Mexico, and Chile, is reshaping how insurance services are delivered, leveraging technologies like AI, big data, and IoT.

Sector Highlights:

• 📈 Diverse Activities: 12% of ventures are innovating new business models, 42% focus on digital distribution, and 46% enhance existing operations by collaborating with traditional insurers.
• 🚀 Leading Markets: Brazil leads with number of insurtach companies, followed by Mexico, showcasing significant insurtech activity and innovation.
• 🏦 Regulatory Advances: Mexico's Fintech law and ongoing regulatory developments in Colombia and Brazil are supporting the sector's growth and stability.

Insurtech in Latin America is not just growing; it's transforming the traditional landscape of insurance through technology, making it more accessible and efficient.

🔍 Read more here.