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International trade expert Leonardo Gonzalez Dellan has highlighted the recent boom in fintech startups in Mexico as an example of what the region can achieve for this sector. “The massive growth in fintech companies, up to 1166 this year in Mexico is highly symbolic of what this region can achieve, and a blueprint for future success,” he said. After past decades of economic turmoil and instability, the rise in Mexican fintech has shown that people are willing to use alternatives ways of managing their finances on a large scale.
Mexico contains 23% of all fintech startups, on a continent where five years ago the concept was unknown. These startups have shown both a booming entrepreneurial spirit in Mexico, but also a growing tendency to internationalisation, an outward-looking mindset that gives great hope for the future. After the 2008 global crash, there has been a pronounced distrust in conventional, established banks in Mexico, with only 54% of people across Latin American holding a bank account in 2017.
These fintech startups are a local, communal way of carrying out business, that do not need a complex financial education and instead rely upon a personal understanding and trust that allows business to flourish even in areas with limited connectivity. As Gonzalez Dellan says; “fintech companies provide a low-cost, low-tech solution to basic financial issues with not penalty to efficiency or effectiveness. Mexico can be a pioneer for the rest of Latin America in providing a model that puts the customers first and ensures ease of access for all.” The recent Ley Fintech(Fintech Law) has ensured that fintech startups are reasonably regulated, and the sort of thoughtless breakaway that has led to the lowered Mexican trust in banks has been limited. The Mexican fintech model is a superb example of how to seamlessly integrate this technology into society, while ensuring that customers stay first.
Leonardo Gonzalez Dellan is an international trade expert and entrepreneur.
Nadeem Shaikh, who founded Anthemis, the VC company behind many FIntech start-ups has been writing and talking about Financial Wellness for some years now. He brings academic research on the subject together at his new website, Financial Wellness Resources. There is a great deal in this approach and in the idea of bringing together different elements of health, insurance and finance in new products and services. You can also see his Ted talk on the subject here.
Patrick Mahony, Emerging Markets expert, argues that “understanding the ten key differences between India and China, will be vital to making the right investment decisions when choosing to invest in these two rapidly growing economies.” The emerging economy of India has long been identified as the key player in the next phase of world economic growth. Since 2015 GDP growth in India has pulled ahead of China and is projected by the IMF to continue to do so. But this means that the next cycle of growth is going to be different in character from the last one because India is markedly different from China.
China’s peak period of growth was driven to a large extent by the consumption of key commodities, minerals and energy, culminating in China accounting for 50% of world demand by 2010. Mahony argues that this time around commodity consumption will be important but India will be exporting code and English language-based products through Web 2 applications. “This will drive growth but also reshape the world’s commodity markets again and differently. Traditional commodities will of course matter but other elements will shape the future as much, if not more, than the demand for metal and minerals did in the rise of China”
In the traditional commodity sector, there are three key demands in India that should be watched carefully and one supply side factor that will shape the future. “The three demands to watch are India’s endless growing demand for Gold, its need to embrace copper to enable electricity supply to increase, and its lack of sufficient domestic supply of coking coal.” These demand factors are important but only because of other variables and differences between China and India. Mahony advises that investors keep a careful eye on Gold, Cooper and coking coal in the traditional sectors, and to think about eight important differences between India and China as well:
1) The pace and intensity of the growth of the Indian population against stagnation in China
2) The ability of the Indian Middle Class to grow more quickly than that in China
3) The ability of this Middle Class to keep and spend a higher proportion of its own income
4) The democratic limits of the Indian state’s directive power
5) The relative importance of Indian service sectors in comparison to China’s primary sector and how that in turn shapes its demand and supply
6) The higher industrial base from which India starts, which requires lower levels of commodity consumption than China did at the same point in its economic development – e.g. China needs eight times as much aluminium than India to generate a million dollars of GDP
7) The lower income base of India’s overall population, which therefore gives it a much greater capacity for growth
8) The youth of the population - India, in common with the wider South Asia and South East Asian region is also much younger than China – half the population is under 30 and there has never been a single child policy
All of these factors matter greatly, says Mahony, citing recent research published by David Humphreys at the University of Dundee. But Mahony says that what most commodity-based analysis leaves out is the digital drivers of India’s economic growth in this phase compared to the same era of Chinese growth. If you factor in digitalisation based on Web 2 and other services, then the contrasts between India and China become even more striking. Humphreys and his academic colleagues, Mahony says, understand traditional commodities and, in looking at India and other emerging markets, they see the differences very clearly, however they underestimate the impact of universal mobile broadband access and the changes this will lead to. “They capture this when they identify the importance of copper, but that matters because of the need for a steady supply of electricity to power Web 2 and other digital services in the houses of the growing Indian middle class.” The implications go deeper. For India, that means one supply element is a crucial variable, and a powerful competitive advantage for the subcontinent in general: “the supply differential that matters most between growth in India and growth in China is the English language”.
So, Mahony suggests, we should add two more differences between India and China:
9) The widespread presence of English language in the Indian population
10) The supply of Indian software engineers who are versed in both English and the key coding languages of the Web 2 economy
In the future, Mahony argues, “English will one of the commodities that matters most”.
Patrick Mahony is an Emerging Markets expert
Latin American trade expert Leonardo González Dellán has highlighted the expansion and modernisation of road networks across Latin America as an overlooked yet crucial sector in supporting economic growth across the continent. “Ensuring that land transport networks in Latin America are sufficiently modernised will require an expansion of public-private partnerships to create cost effective infrastructure programmes that will allow a much wider range of business opportunities for regional, local and international companies. Companies can do business faster, smoother and across a much wider geographical area with the appropriate resources.”
Dellán has highlighted that in the 2017 Competitiveness Report of the World Economic Forum (WEF), in the quality index of road networks, two of the region's main economies - Argentina and Brazil - are ranked 96 and 103 out of 137 respectively. He argues that in order to boost themselves in the world stage, high-potential Latin American economies need to ensure that they are not so focused on rushing ahead with every new project they can see but ensuring that they have an infrastructure network set up around them to ensure longevity and thus greater protracted growth. He has also pointed to a BN America’s report that focuses on the benefit that greater development of the public-private sector relationship will have on domestic economies, further infrastructure programmes and stability in the political economy. Dellán says “wide-scale regional investment in land transport networks will not only provide a strong boost to the scale and sustainability of the operations of Latin American companies, it can provide many holistic benefits in providing construction jobs on the programmes themselves, and it can help to develop the architecture of private-public sector co-operation in multiple economies.”
Be careful if you trade online in Iran and other places: Sanctions will be enforced again from November 4th Aug 23, 2018
Whatever size of company you have, be careful: you might need to get out of the Iranian market before November 4 or face the consequences of penalties for sanction busting.
The online betting market, with a number of UK players trying to break American, needs to take note.
With the opening up of the US sports betting market, international players need to look hard at where they and their partners operate because US players in this field will not be slow to report them.
Until May 2018 the only state in the US in which you could legally bet on sports was Nevada. Then the US Supreme Court overturned that ban, in one of a number of recent decisions that strengthen the rights of states over the federal government. Congress could still legislative to prevent states from allowing the gambling but with a powerful lobby of gaming companies supporting the move, it is unlikely to do so, and this frees up the US market for domestic competition. But what is even more interesting, from an international trade perspective, is that it allows international players into the hugely lucrative sports betting market. Estimates of the current value of illegal sports betting are between $150billion and $400billion.
Because this market has been closed for decades, many of the key international players in the sports betting world have had to find alternative markets to develop. These markets are good, but they are nothing compared to the potential of the sports mad USA.
At the moment the physical gaming market in the US is worth about $70billion and the total value of gaming to the US economy is around $240billion. Ten states are set to allow internet gambling over the next year or so, growing the value nationally and away from the small number of states that have historically allowed it to take place. It will not take long for the legal market to become as lucrative as the illegal one.
So what if the gaming companies have to make a choice between markets they have been forced to grow and the market that has the most potential?
Here is an example of the kinds of tough choices players in this space are now having to make.
GAN is a UK listed gaming company that is becoming a leading player in the US market. They recently announced a strategic partnership with SB Tech. Who promise on their website that: We ensure that you get the best solution for your needs, while meeting all regulatory requirements in any market. SB Tech in turn supplies one of the major players in the online gaming market in Iran. As their website proudly boasts:
Betcart is part of the Bcourt Group NV, which is based in Curacao. This is also where the upcoming bookie is licensed and they were established in 2010. Since then, Betcart has made an impact in the betting industry and especially in Italy and Iran, where they hold exclusive domains, www.gobcart.com and www.bordbc.com. Their sports betting platform is provided by Sbtech, one of the greatest software providers globally.
Gambling, except between the participants of archery contests, camel races and horse races, is illegal in Iran, so most people who gamble either go to Turkmenistan or bet online. Iran is one of the most active online markets in the region. Betcart is doing very well in this market. Its review on the Bookmakers review site calls it the “Top choice for Iranian players”.
So, the question for these companies is what to do when the newly re-imposed sanctions on Iran covering online financial activity and specifically the financial transactions necessary to bet, begin to be enforced after a winding up period comes to an end. Specifically, the Treasury Department guidance states that the following is prohibited:
iv. Sanctions on significant transactions related to the purchase or sale of Iranian rials, or the maintenance of significant funds or accounts outside the territory of Iran denominated in the Iranian rial;
Apple long ago decided that its app store was covered by the sanctions:
“Under the U.S. sanctions regulations, the App Store cannot host, distribute or do business with apps or developers connected to certain U.S. embargoed countries.”
GAN might not be given a choice if it wants to continue to grow its US market because, the Treasury department guidance also states that:
Persons engaging in the activity listed above undertaken pursuant to the U.S. sanctions relief provided for in the JCPOA should take the steps necessary to wind down those activities by November 4, 2018, to avoid exposure to sanctions or an enforcement action under U.S. law.
Other international players are in the same boat. With trade wars waging with China and Turkey, these markets might also soon come under scrutiny, potential tariffs and even sanctions. In fact, they almost certainly will. I would bet on it.
Leonardo Gonzalez Dellan has identified Five Multilatinas to watch:
1) Petrogas: oil and gas and biofuels - Brazil
2) Grupo Bimbo: the world’s largest bakery products company – Mexico
3) Vale: the world’s largest producer of iron ore - Brazil
4) Latam Airlines Group: second biggest airline – Continental
5) Mexichem - largest producer of fluorspar in the world- Mexico
International trade expert Leonardo Gonzalez Dellan has drawn attention the recent surge in growth of multilatinas, Latin American corporations with operations on a global scale . He has said that “this new increase in Latin American companies who can operate on a regional and international level are a sign of innovation, of entrepreneurial spirit and of a regeneration in the Latin American economy. At a time when there is a danger of the world becoming close-minded, the growth of these multilatinas is a symbol of Latin American openness and a willingness to do business.”
According to a Boston Consulting Group report, multilatinas became a noticeable economic phenomenon in 2009, after the 2008 recession. They work in a diverse array of sectors, including telecommunications, infrastructure development and consumer goods. Most recently, there has been a surge in in both financial and technology development companies. The BCG’s list of multilatinas this year has noted a larger presence of consumer companies, reflecting the growth in the Latin American Middle class, a greater geographical diversification of companies, and a stronger contribution to job creation, expanding employment at these companies by “2.6% annually from 2013 through 2016, above the regional average of only 0.3% per year for the same period.” Dellán argues that this data can help show the pivotal role multilatinas have played in helping the Latin American economy to recover from recession, but also how they are not merely filling a gap but creating a surging new area of economic growth. He argues that multilatinas are a critical part of the future Latin American economy.
“If we look at all the reporting on multilatinas going back to 2009, we can see how they have expanded both into new sectors of the market, and into new countries. Wealth has not been concentrated but is spreading across the whole of Latin America.” His arguments for the potential of multilatinas can be seen in the context of a Latin American economy rich with assets and potential, but yet also stagnating. The BCG report highlights how “(Latin America’s) share of global GDP shrank from 8.6% in 2009 to 7.7% today…at a time when emerging markets in general have boosted their share of global economic output from 33% to more than 50%.” Dellán believes that multilatinas can best take advantage of the potential and the assets Latin America has to halt this decline. He has noted the strong cultural and linguistic links between both Latin American countries themselves, and internationally, and Latin Americas abundance of natural resources; accounting for 14% of the world’s agricultural land, 15% of oil reserves, 21% of forests, 28% of available water, 54% of copper production, and 66% of lithium reserves.
“The geographical diversification of multilatinas in recent years will help these companies take better advantage of the natural resources this continent possesses, and therefore help Latin America stay competitive on the world stage,” he argues. He points to Chile as an example of what multilatinas can achieve. While it only makes up 5% of Latin America’s GDP, Chile is home to 18% of multilatinas highlighted in the BCG report, and it has been the most successful Latin American nation at translating economic growth into improved well-being for its citizens, according to BCG’s Sustainable Economic Development Assessment. Dellán argue that this can show the benefits that continued investing in Latin American companies with cross-border potential can have, “that not only can they ensure Latin America’s place in the world economy, they can provide a tangible benefit for the citizens of Latin America too.”
Leonardo González Dellán is an international trade expert and entrepreneur.