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Superfoods also take care of Amazonia’s health
The development of sustainable value chains for quinoa, cocoa, sesame, and other high-nutritional-value crops can foster integration into international markets, benefit the region, and contribute to sustainable development goals.
By Adopting Traceability in Its Supply Chain This Company Managed to Become More Sustainable
In a world where sustainability is part of the DNA of business, an Ecuadorian company implemented standards to guarantee socially just and ecologically respectful practices throughout the value chain.
A Global Movement for Sustainable Growth Sprouts in the Heart of Amazonia
IDB Invest Sustainability Week 2024 brings together an array of public and private sector stakeholders, the impact investors community, governments, international organizations, and civil society in Manaus with one goal: scaling up impact.
What can Messi, Neymar and Suarez tell us about banks and fintech companies?
On May 26, 2013, a tweet from FC Barcelona confirmed that the 21-year-old Brazilian striker Neymar Jr. had accepted a multi-million dollar contract to join five-time Ballon d’Or winner Lionel Messi in the Catalonian soccer team. Fourteen months later, the same club hired the Uruguayan star Luis Suarez. A couple of weeks later, Barcelona’s legendary player Johan Cruyff suggested that the new hiring could ruin the team: “The three of them are too individual; I can't see how Barça intends to continue playing…” Fintech firms, the emerging financial service sector of the 21st century, are flourishing across Latin America and the Caribbean with no exception. The Inter-American Development Bank and Finnovista have identified more than 700 Fintech firms in 15 out of 18 countries in the region. Bullish observers believe the emergence of Fintech companies represent the end of traditional banks; the skepticals claim Fintech firms are not meant to last. Though it is difficult to anticipate how tech innovation will shape financial intermediation in the future, market participants have more to win in a collaborative “ecosystem”, rather than playing a zero-sum game. Business opportunities are huge for all participants and every player has something to bring to the table. The field for FIs and Fintech firms in the region Credit still represents, on average, less than 45% of the gross domestic product (GDP) in Latin American and Caribbean countries, well below the average 150% in developed countries. For example, in Argentina, one of the richest countries in the region, credit represents less than 15% of GDP. On top of this, half of the adults in the region do not have a banking account and, in some countries, such as Nicaragua or Peru, this ratio hits three out of four citizens. Cash continues to be the most used mean of payment in the region with 90% of utilities paid in cash, according to some studies. [clickToTweet tweet="Credit represents less than 45% of the GDP in #Latam and #Caribbean countries" quote="Credit represents less than 45% of the GDP in Latin American and Caribbean countries" theme="style1"] However, the region benefits from a huge advantage: technology adoption is incredibly fast. Mobile penetration reaches 70% of the population, comparing relatively well with the 84% enjoyed by Europe, the world’s most developed continent mobile-wise, according to GSMA. On top of this, Latin America is expected to be the second fastest growing mobile market in the next five years, setting the perfect platform for fintech companies’ growth. Fintech firms’ biggest assets are their accessibility through digital and mobile channels, their agility and velocity to adjust to a changing environment, and their capacity to maximize the customer experience. According to Capgemini, almost 70% of costumers would refer their fintech service provider to a friend, but roughly 45% to their bank. On the contrary, though the gap is closing, traditional banks take the lead when talking about trust. 60% of consumers completely trust their banks, no matter the quality of the service, indicates the study. In the same line of thinking, although fintech companies are gradually diversifying their funding sources, banks have a wider reach in terms of access to capital and cheap and stable retail deposits. And banks also benefit from the regulators’ blessing. A new game strategy for Latin America and the Caribbean At the Inter-American Development Bank Group (IDB Group), we believe collaboration should be the rule and not the exception. That’s why, in the context of the 2017 Mobile World Congress, we launched FINCONECTA, a 10-month program dedicated to create the first interconnected ecosystem of solutions between financial institutions and leading fintech firms to foster the exponential growth of the financial industry. The results will be announced in the FOROMIC 2017, to be held at the end of October in Buenos Aires. [clickToTweet tweet="1 out of 3 #banks operating in #Latam are already partnering with #fintech companies" quote="One out of three banks operating in Latin America are already partnering with fintech companies" theme="style1"] “Messi knows that the players around him make him a better player, and he makes his mates better too,” affirmed former Barça’s head coach Luis Enrique in an interview. In the last three seasons, Messi, Neymar, and Suarez have scored more than 300 goals by playing together. According to a study conducted by PWC, one out of three banks operating in Latin America are already partnering with fintech companies, and more than 80% expect to be doing business together in the next three to five years. The ball is rolling. It’s time to let banks and fintech firms play together and consumers will be as happy as Barcelona’s fans. You can also see more on the impact of the fintech revolution in Latin America and the Caribbean on this full report. Subscribe to receive more content like this! [mc4wp_form]
What can Latin America and the Caribbean learn from Silicon Valley
In 1984, Steve Jobs launched the first Mac. The classic film “Revenge of the Nerds” was released the same year. At the time, computers and nerds went hand in hand. During my adolescence, the impression of what seemed to be happening in Silicon Valley was “not cool.” In recent decades, the area that stretches to the south of San Francisco has become the undisputed pole of innovation worldwide. Many countries have tried to develop their own versions of Silicon Valley, but for most of them this is an elusive goal. Silicon Valley is a unique ecosystem, thanks to the clustering of the top technology companies, universities closely linked to the subject, innovation laboratories, and a very extensive private equity industry. But what really makes this valley unique is its entrepreneurial culture. They take risks, learn from their failures, and always think big: growing 10 times and not by 10%. In his recent annual letter to Amazon’s shareholders, Jeff Bezos emphasizes the importance of having an obsessive customer focus. Bezos explains how machine learning and artificial intelligence impact almost all areas of his company. Above all, he highlights the enormous risk of becoming irrelevant if they get stuck on internal processes, if they don’t make quick decisions, and they don’t adapt to major trends. In summary, the letter is a manifesto to the Silicon Valley culture, an exponential vision of the future. The Silicon Valley recipe: New business models Last June, the directors of the Inter-American Development Bank (IDB) and the staff of IDB Invest (formerly known as Inter-American Investment Corporation) spent three days in Silicon Valley, for their first joint trip. The intense agenda included several of the most emblematic technology companies, incubators, accelerators, risk equity funds, and think tanks. Some of the most mentioned technologies were the Internet of Things, artificial intelligence, blockchain, robotics, 3D printing, virtual reality, and augmented reality. However, beyond its inventions, Silicon Valley is well-known for mainstreaming new business models. In many cases, these models have changed complete paradigms, such as the economy “uberization” and the crowdfunding. Ultimately, Silicon Valley is the window from which we glimpse the changes that will impact all areas of our lives, from our work, home, cities, and transportation to our finances, health, education, and entertainment. Computer processing costs continue to fall, so we should expect disruptive changes in every industry exposed to technology. This means nearly all industries! Silicon Valley's key for Latin America and the Caribbean Upon our return, we had many questions about Latin America and the role of development banking: What are the major development challenges emerging from these technological changes? How can we prepare to buffer the imminent impact that the most vulnerable will suffer? What kind of knowledge should we generate and how should we disseminate it? How can we ensure that regulations and laws (that by nature move more slowly than technology) favor innovation, efficiency, and inclusion? How can we deepen support for the Latin American entrepreneur? In the ICT (Information and Communications Technology) industry it is essential to support, in public and private spheres, investments in broadband in a region that has consistently under-invested in infrastructure. Mobile broadband is the great facilitator of the technology ecosystem and the great democratizer of the twenty-first century. Networks must be ubiquitous and costs need to be accessible. It is important to promote competition and entrepreneurship, and prevent market concentration. During 2017, IDB Invest has contributed to this goal/effort with loans to Telecom Personal in Argentina and to Tigo in Paraguay. Despite this, development banking must be more ambitious. In a world that is accelerating at great speed, banking must lead by looking forward and not in the rear-view mirror. The recipes from the past do not work when we are facing paradigm changes. The quantity of data circulating on the Internet doubles every year and a half. Currently, more content and information is generated per day than what was generated in entire centuries during the pre-digital age. Using landline phones, we took more than 100 years to connect all households. With cell phones, we connected nearly everyone in less than 20 years. And now, Dell, IDC, and others expect that by 2020 there will be between 30 billion and 50 billion objects connected to the Internet, helping in turn to provide feedback for machine learning and artificial intelligence. Much has changed since the release of “Revenge of the Nerds.” Now, in Silicon Valley, nerds are cool: they work in jeans and sandals, get around on skates and colored bicycles, they relax on beanbags, and are offered free meals, 24/7. In many cases, their bank accounts feature a lot of zeros, which is not surprising since the five companies with the greatest market capitalization in the world are Apple, Alphabet, Microsoft, Amazon, and Facebook. The nerds have in fact had their revenge! Subscribe to receive more content like this! [mc4wp_form]
How sustainable infrastructure can decide Peru’s future
Last March, Peru experienced extreme weather conditions in the north of the country. This resulted in numerous physical, economic and human losses with costs associated at over US$3 billion, or 0.5% of GDP. Planning for reconstruction, the country found itself at a crossroads: it could focus solely on meeting immediate construction needs or rebuild with a long-term vision. The latter option, to adapt the new infrastructure to the uncertainty of weather conditions, represents an opportunity to incorporate sustainability in highways, bridges, water distribution and management systems, as well as to leverage public-private partnerships and rebuild Peru’s economy to compete in the global market. The government of Pedro Pablo Kuczysnki has launched a reconstruction plan called “Reconstruction with Changes” which has two phases. The first seeks to invest up to US$3 million in immediate reconstruction and resettlement. The second, projected to last five years, focuses on the development of modern, climate-resilient public works that represent an additional investment of US$6 billion. A private sector opportunity A large part of infrastructure losses is absorbed by private markets, and for this reason the private sector has a lot to gain from reconstruction. For example, a new highway can allow products to reach their markets more quickly, lowering the cost of doing business for companies. The private sector not only benefits from reconstruction. It could also be part of its development. Estimates from the World Economic Forum suggest that for every dollar of public capital that is mobilized to close the infrastructure gap, five dollars of private capital should be mobilized. However, financing alone is not enough. Key tools for reconstruction IDB Invest (formerly known as Inter-American Investment Corporation), the IDB Group’s private sector arm, has experiences in technical assistance that can serve as a reference for Peru. In Mexico’s Port of Manzanillo, we found ways to adapt the design of the port to unpredictable weather conditions. This included ensuring reforestation and measuring the port’s carbon emissions. We made sure that the terminal operators have the tools and training necessary to replicate the environmental assessments every year. We also use the Envision methodology, developed by Harvard University’s Zofnass Program for Sustainable Infrastructure and the Sustainable Infrastructure Institute. The methodology focuses on quality of life, leadership, resource allocation, the natural world and climate, and risk. The tool has helped our clients measure sustainability, particularly during project planning and design phases. Environmental and social safeguards promote minimum quality in infrastructure investments. In June 2014, during the review of a loan to a local cement plant, our environmental models predicted atypical rains in Asunción, Paraguay. Our environmental specialists needed a contingency plan. When flooding occurred, the plant mitigated damage although there were some construction delays. The project’s sponsor recognized the importance of the environmental safeguard measures and invested in additional water studies, new internal routes with barriers and protected storage facilities. [clickToTweet tweet="For every dollar of public capital in #infrastructure, US$5 of private capital should be mobilized" quote="For every dollar of public capital that is mobilized in infrastructure, five dollars of private capital should be mobilized" theme="style1"] Corporate governance safeguards and attention to integrity also strengthen infrastructure sustainability. Although Latin America is a middle income region, two-thirds of its countries fall in the bottom half of Transparency International’s “corruption perception index.” According to this organization, 26% of Peru’s population has been the victim of corruption. IDB Invest maintains the highest standards of integrity, and we are confident that with our support for the RCC we will reduce this rate. Finally, investments in sustainable infrastructure can attract institutional investors. Investing in socially and environmentally responsible companies is increasingly considered a fiduciary responsibility and a means for increasing the value of company assets over the long term. We have witnessed the interest of such investors when we presented sustainable and bankable investments. The Reventazón hydroelectric dam in Costa Rica and the Campo Palomas and Colonia Arias wind farms in Uruguay have been pioneer projects in attracting financing from local institutional investors. In Peru, we seek to leverage local money and our capacity to advise public-private partnerships to attract more local stakeholders. This is a critical moment, but Peru is well positioned to convert its losses into opportunities. Investments in sustainable infrastructure are the only guarantee for building a more inclusive, less vulnerable, and more competitive future in the 21st century. Subscribe to receive more content like this! [mc4wp_form]
Can banks serve the Women’s Market without sidelining men?
If a bank makes targeted efforts to better serve women customers, does this necessarily mean men are shortchanged? Global experts at the recent Global Banking Alliance for Women (GBA) All-Stars Academy in the Dominican Republic agreed with a resounding “no”.
Finance adapts to climate change
Climate change is already a real threat that affects macroeconomic variables and company results in Latin America and the Caribbean. For example, Peru may not be able to reach its inflation target this year due to the rise in agricultural prices caused by atypical rains. In Colombia, insurers face pressure on their risk rating due to recent landslides and floods. In the Dominican Republic, the trade deficit and the exchange rate are being affected by the impacts of climate change on agricultural exports. In effect, Latin America and the Caribbean lose an average of 1.21% of their gross domestic product (GDP) due to economic damages associated with climate change, according to the Climate Risk Index 2017. These events are geographically dispersed but are occurring with increasing frequency and generating unanticipated costs. The impact of climate change is all around us: from damaged roads and destroyed bridges that keep products from reaching their market to changes in agribusinesses such as coffee and cacao quality and harvest. It is even reflected in the risk to business continuity that a company may have when obtaining a bank loan. [clickToTweet tweet="#Latam & #Caribbean lose near 1.21% of GDP due to economic damages associated with #climatechange" quote="Latin America and the Caribbean lose an average of 1.21% of their GDP due to economic damages associated with climate change"] For this reason, more than 280 investors are taking steps to ensure that climate-related risks are formally presented, so as to make more informed decisions. This new process, associated with new regulations and reduced technology costs, is generating a tendency to divest stranded assets. In addition, institutional investors now prefer cleaner sectors, such as solar power. This opens up a window of opportunity, where financial institutions in Latin America and the Caribbean are already taking the lead. What are the opportunities for the financial sector? Climate change is accelerating the transition to more flexible, greener, and more circular economies. In Latin America and the Caribbean, we see how the financial sector is developing and using financial products that can only be explained by the existence of climate change: Green bonds for financial institutions. Green and/or climate bonds are a new financing option and have begun to grow rapidly in the region with solar energy projects under way, such as Solar City in Mexico. Investment funds. Ecotierra’s Canopy Fund is an example of this, in that it seeks to diversify the risks associated with climate change in the production of coffee and cacao, attracting both impact investors and traditional financing for such supply chains. Climate finance. Climate finance has helped to launch public-private partnerships (PPP). For example, in Chile, public lighting is being replaced by LED technology, with the support of the Canadian Climate Fund for the private sector in the Americas (C2F). Changes in business models. Banks are beginning to internalize climate change in credit ratings, for example by analyzing the flow of each of their clients according to the segment to which they belong. In IDB Invest (formerly known as Inter-American Investment Corporation), the private sector arm of the IDB Group, we are developing approaches and tools to make it possible to reduce and transfer investment risks, facilitate the development of PPPs and promote financial innovation to adapt financial products to the new unstable reality presented by climate change. These are just a few examples of how to take advantage of climate finance. What is clear is that climate change is an opening emerging sector that require specific financing. Those financiers that adapt are gaining the benefits as first-movers. Subscribe to receive more content like this! [mc4wp_form]
How can we boost sustainable infrastructure investments?
Evidence is mounting that through the right mix of policies and incentives the world can significantly reduce climate risks while boosting growth. Last month, the Organisation for Economic Co-operation and Development (OECD) said that action on climate change can generate inclusive economic growth over both the short and long term. These policies can increase GDP by up to 2.8% on average across the G20 countries in 2050. The question is, how can we capitalize on these opportunities while reducing climate risk? We believe that the answer is joining forces from governments, multilateral development banks and investors to increase investments in sustainable infrastructure.