Talk about the tech landscape in Latin America and the first thought that springs into mind are the flashy startups and enterprises from New York and the Silicon Valley. So, whenever China is hailed as the key player in South American markets, and that too in cryptocurrency, it seems unusual and even a tad bit surprising.
Irrespective of what the naysayers think, the Chinese stronghold in the South American markets is nothing short of a living, breathing, and rather booming reality.
This has ironically been helped by the fact that the Chinese government has placed strict bans on cryptocurrency enterprises to operate within the country. The plethora of Chinese millionaires interested in cryptocurrency investment have found a workaround this ban, and that currently appears to be through an investment in the vastly untapped South American markets.
Case in point is the latest New-York City-based startup, Moeda, which has devised an infrastructure to allow micro-lending for the unbanked population in emerging markets via a cryptocurrency named MDA. The operations have helped new businesses boom in Brazil, where microloans have been offered to women-owned enterprises on a 15% interest rate, in comparison with whopping rates of up to 120% in the earlier years, mainly financed by young Chinese investors.
The business model has been so successful that it has attracted up to 841 investors. In August, the company reported funds of up to $20 million over two weeks, from which they allocated $10 million to the microlending projects. The loans have been distributed among 18 companies thus far where a $55,000 loan to Hope Valley, a 10-year-old pumpkin and yucca farm and food processing company in Formosa, Brazil has helped them in paying for a new irrigation system and food processing equipment. This has consequently led to yields five times than before, and the contracts to public schools have also boomed from 30 to 90.
What is the key difference that made this dramatic influx of Chinese crypto wealth possible? Besides the political reasons mentioned above, for social venture investors, the key problem was the deficit in trust and the uncertainty behind the proper allocation of their money. With Moeda’s blockchain technology, the open ledger system provides financial transparency like never before, as the investors can easily track investments and the money trail cannot be tampered or erased.
Apart from social entrepreneurship, other cryptocurrency companies are also rushing in to cash on the booming tech Latin American market. For instance, Huobi, a leading Chinese crypto-currencies broker, has recently announced the establishment of their operations in Brazil, which certainly means a massive influx of further Chinese investment into the market.
Chinese investors, in general, have been shakers and movers in the region for over a decade now. For instance, according to a 2018 report by the Economic Commission for Latin America and the Caribbean, China has poured in over USD 90 billion in the region between 2005 and 2016 and has provided the much-needed impetus to fuel the Latin America’s tech boom.
According to stats in 2015, the Chinese government revealed a decade-long plan to increase trade with Latin America to USD500 billion while investing USD 250 billion. Another study by the United Nations Economic Commission for Latin America and the Caribbean (CEPAL) revealed that Chinese investors make up a mind-boggling 42% of the total investment contribution in the region.
The critical factor behind the success of this alliance is the stark similarities of the current tech landscape in Latin America and the situation on China ten years ago. The sudden, mass-adoption of smartphones in Mexico and Chile is akin to the 1 billion inflow of Chinese users to mobile internet a decade ago. Apart from the crypto technologies, the smartphone revolution has also brought in a range of other startups that range from online marketplaces for groceries, food delivery, bike rentals, mobile taxis, and everything in between.
Considering how China itself underwent the rigors of a developing economy experiencing tech-based growth on a staggering pace along with the endless possibilities that crypto technology provides. The very potent alliance between the economic world leader and the next probable tech powerhouse is indeed ripe to bear fruits for decades to come.
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