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In trying times, Latin American enterprises are working to fill gaps

Published 1 September 2023 in Competitiveness • 6 min read

It is my belief that many business innovations that will benefit society going forward will come from the Global South — especially from Latin America. We in the Global North can learn a lot from the region about building resilience amid uncertainty.

Invest in Latin American startups amid economic and geopolitical uncertainty? I’d say it’s seriously worth considering for the following reasons. First, executives have a history of handling uncertainty, crises, and building resilience. Second, the region is fertile ground for innovations that bring environmental and social solutions to market. And third, if investors can look beyond country risk, interesting private sector opportunities are out there.  

Regarding uncertainty in the developed world, on a macro level, some of the biggest challenges we face now include (a) political instability, polarization and the appearance of anti-system extremists; (b) inflation; (c) high interest rates that make investment costly and add exchange-rate and balance-of-payments pressures; (d) continued inequality and rising poverty; (e) not enough decent jobs, and (f) all of the above – as usual, happening at once. 

No disrespect meant to Latin America (I am originally from Argentina myself), but the region has had ample experience with all the above in its business environments. And that hard-earned experience could prove useful to businesses in other regions today. The scaling of Latin America’s impact enterprises of the last decade is especially interesting as the world grapples with transitioning to more sustainable practices. Through impact investing and other instruments, European investors can fund truly innovate environmental and social solutions and get a good return, too.  

Here I will briefly mention some of the causes of uncertainty and explain why I am still cautiously optimistic about Latin America’s entrepreneurial ecosystem, especially those companies working to address social needs.  

The most unequal region

In terms of wealth and income distribution, Latin America is the most unequal region in the world. The richest 10% of the population hold nearly 78% of the region’s total wealth (compared to 61% for Europe). Mounting unmet needs have been a persistent problem for decades now and it fuels civil dissatisfaction. 

The rapid economic growth that came along with the commodities supercycle of the 2000s led to more stable political regimes and reduced poverty rates for many countries by the end of 2010. But that petered out as commodity prices languished. And then COVID-19 put pressure on already week health and education infrastructures. Poverty rates took a turn for the worse, with more volatile unmet social needs fueling social unrest. (Which leads to our next problem.)

Political instability and 50/50 polarization 

Civil unrest has many faces these days in Latin America. From the more left-leaning demands in Chile and Colombia, to the despair apparent in support for the extreme right Javier Milei in Argentina. Too many people are angry that politicians and their policies, from the left and right, do not seem to bring solutions to the key problems mentioned. In Chile, Colombia, and Peru, for instance, recent mass protests express these demands. 

“In terms of wealth and income distribution, Latin America is the most unequal region in the world. The richest 10% of the population hold nearly 78% of the region’s total wealth.”

Similar to what we’re seeing in Spain and in the United States, the region’s political polarization tends to divide many countries roughly in half. In Latin America, we see populist leaders from the left, like Daniel Ortega of Nicaragua or Andrés Manuel López Obrador of Mexico, and from the right, like Brazil’s Jair Bolsonaro. Citizens don’t seem to have much hope that the next elected leader will be any better.  

As such, institutions seem extremely fragile now. Democratic elections don’t seem to be enough to fix all the problems that need fixing and even may open the open the door to antisystem forces like Milei in Argentina. In this context, how can one be optimistic? Can the private sector still be a source of hope?  

Beyond commercial (or financial) goals 

In the current context, to run a successful business, you need to bring solutions that sometimes go beyond the traditional commercial realm. Latin American businesses usually need a social license to operate. If a corporation is seen as exploitative, it needs its own private army to “defend” itself. A much better approach is to get stakeholders’ buy-in. I should clarify that, in reality, some companies are still exploitative, taking advantage of the region’s confusing, and many times lax regulations to come in and take what they want. But, at the same time, many companies choose to operate in a way that’s compatible with ESG or sustainability aims. And these are the companies, I think, that Europe’s investors should be interested in because they are growing quickly, doing good and making a profit. 

Three interesting sectors to watch are healthcare, education, and finance — that is, financial inclusion. An example I like is the fintech startup Stori, from Mexico, which offers credit cards to people who had previously been excluded from this convenient payment means. Founded in 2018, Stori is already a unicorn, with a valuation of over $1 billion.   

At the same time, Brazil is also home to several successful startups, including Nubank, a digital bank that has raised more than $1 billion in funding and brings intuitive financial solutions for individuals as well as small and medium-sized enterprises (SMEs).

Colombia’s Symplifica has built a digital platform to help domestic workers and employers in Latin America with payroll management and social security, as well as other benefits and legal issues. It helps reinforce growing recognition by the region’s governments of the rights of domestic workers and strengthens worker protections across the sector. Quipu Market, with founders from Colombia and Argentina, provides an online platform that empowers individuals and budding entrepreneurs – predominantly women, who make up 80% of the customer base – from economically disadvantaged communities to engage in commerce using virtual tokens. With its accessible mobile and web platform, it offers microbusinesses a chance to enhance their visibility and establish creditworthiness, even in the absence of conventional banking access. 

The fintech startup Stori, which offers credit cards to people who had previously been excluded from this convenient payment means. Founded in 2018, Stori is already a unicorn, with a valuation of over $1 billion

In the education realm, Colombian educational platform Platzi has also shown impressive growth, with partnerships all over the world aiming to make education accessible.  

In healthcare, Mexico’s MEDU manufactures sustainable medical protective clothing that can be reused: one MEDU gown replaces more than 450 standard hospital gowns. Also, Mamotest, with headquarters in Argentina, created the first telemammography network in Latin America. It operates state-of-the-art diagnostic centers in underserved areas, providing mammograms at low cost, and breaking down geographical, technological, and economic barriers.  

As the technological infrastructure in LatAm advances, opportunities multiply for the private sector. While it’s imperative to acknowledge the vital role the public sector must play, don’t overlook the emergence of inclusive and innovative private-sector business models that promise to bridge existing gaps. 

Risk in context  

Throughout the region, I see businesses thriving as they seek innovative answers to problems — often without reliable government support. I see a buoyant entrepreneurial ecosystem, including a growing impact sector. I see creative problem-solving in action. The Latin American outlook remains challenging, but not hopeless, as there are signs of resilience and opportunities. And that is why I see good reasons for investing in, collaborating with, and learning from Latin American businesses. The current complex political and economic picture for the region requires nuanced strategies and vigilant monitoring. Can we look beyond specific countries’ risk? The jury is out, but the bigger picture is one of potential.


Vanina Farber - IMD Professor

Vanina Farber

elea Professor of Social Innovation, IMD

Vanina Farber is an economist and political scientist specializing in social innovation, sustainability, impact investment and sustainable finance with also almost 20 years of teaching, researching and consultancy experience, working with academic institutions, multinational corporations, and international organizations. She is the holder of the elea Chair for Social Innovation and the Program Director of IMD’s Executive MBA program and IMD’s Driving Innovative Finance for Impact program.


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