Written by Brian Walsh who leads WIND Ventures, the newly established corporate venture capital arm of COPEC, one of the leading energy companies in Central and South America. WIND Ventures provides startups and scaleups in the new mobility, energy and retail sectors with “unfair” access to Latin America.
Most Latin American countries have strict quarantine measures to slow down and minimize the spread of COVID-19. With restrictions in place for the foreseeable future, the way work is done and commerce is conducted across Latin America has rapidly, and quite drastically, changed.
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Latin America has traditionally had a culture that values relationships and face-to-face business interactions. It also has slow gross domestic product growth under 3 percent. While this part of the culture sets Latin American society apart, I believe one of the keys to increasing regional growth is to implement efficiency-enabling digital tools for productivity-driven GDP growth versus the region’s historical employment-driven GDP growth.
A push toward cultural change?
With the recent explosion of connectivity and smartphone adoption, Latin America is perfectly positioned to make the transition to a more connected workplace. Seventy percent of the region’s population has the internet and it is the second-fastest-growing mobile phone market in the world.
While Latin America’s social media usage has outpaced the rest of the world, there has been cultural resistance to new technologies that enable more efficient work, government processes and even education. As an example, it is rare to see remote work policies in place and the adoption of video conference solutions are not nearly at the same level as in North America or Europe.
As a result of the response to COVID-19, however, Latin Americans are now being forced to use new tools for working remotely (teleconferencing, collaboration tools, workflow management, etc.) and living (food delivery, mobile payments). I believe this could be the “push” that will drive a long-term change even after the global pandemic passes. After all, it’s a common belief that sustained change in behavior occurs after 27 days and it is most likely that this forced exposure in Latin America will continue far longer than one month.
As a consequence of the pandemic, I have five predictions for technology adoption in Latin America:
1. Trust around digital will improve
Latin America, like other emerging economies, tends to have weaker confidence in digital solutions, especially around digital transactions and online shopping. I believe this improves at an accelerated rate as many bear witness to the benefits, convenience and reliability of digital.
2. No-touch services will grow
This experience will fundamentally accelerate the region’s digital transportation. From restaurants, groceries and pharmaceuticals to government I.D. renewals, consumers and businesses alike will more actively look for, and demand, a no-contact solution. Be it pay by phone or online-to-offline services, some measure of social distancing will be integrated into business as usual.
3. Latin American entrepreneurship will grow
Given the opportunity and need for the region to become more productive, in-region entrepreneurs will rightly lean in. While the vast majority of the startup activity is in Brazil, I think we see an even more accelerated level from the other regions, especially Chile and Colombia.
4. Startups from the U.S. will give Latin America more attention
For similar reasons as above, U.S. startups will look farther and wider for growth and realize that Latin America is an attractive market for them. They will move quickly to increase their total addressable market (TAM) by forming strategic partnerships with leading corporations that can help them enter and grow.
5. The cash is king status will lose ground
All of this culminates into a fundamental change for the region–the accelerated decline of using cash. It is reported that for UberEats, nearly 40 percent of all orders in Colombia are paid in cash. This is one of the regional nuances that digital startups entering the market struggle with. But, given the current situation, I think it is clear that consumers will leverage digital more, including for payments which will further accelerate the region’s digital transformation.
In summary, consequences for Latin America from the COVID-19 pandemic are likely to be significant and include a new, heightened, level of interest and adoption in digital productivity tools for newfound, but much needed, GDP growth via productivity. For startups, this new, heightened, level of interest is a great setup to expand into the Latin American market for accelerated growth.
Illustration: Li-Anne Dias.