LATIN AMERICA ADVISOR FINANCIAL SERVICES ADVISOR A PUBLICATION OF THE DIALOGUE www.thedialogue.org June 17-30, 2021 BOARD OF ADVISORS FEATURED Q&A TOP NEWS Ernesto Armenteros Vice Chairman of the Board, BANKING Banco de Ahorro y Crédito Unión What Is Driving Brazilian Pablo Barahona President & COO, Exporters Allege Global Retail Markets West, Liberty Mutual Group Investment in Manipulation Felipe Carvallo Some of Brazil’s largest exporters Vice President - Analyst are demanding 19 billion reais Latin America Banking Brazilian Fintech? Moody’s Investors Service ($3.77 billion) in a lawsuit against several domestic and foreign Richard Child banks. CEO, Mattrix Group Page 2 Michael Diaz Jr. Partner, CREDIT CARDS Diaz, Reus & Targ Ernesto Fernández Holmann Mastercard, Chairman of the Board, LATAM Airlines Ayucus Rich Fogarty Sign Partnership Managing Director, Agreement Alvarez and Marsal The companies plan to introduce Desiree Green Several Brazilian financial technology companies have announced new funding and growth new credit cards and benefits for Vice President, plans in recent weeks. // File Photo: Christiann Koepke via Unsplash. International Government Affairs, frequent travelers. Prudential Financial Page 2 Laura Güemes Cambras In recent weeks, several Brazilian financial technology com- Transactions Attorney, panies have announced growth plans. They include unicorn DIGITAL CURRENCIES Holland & Knight Ebanx, which began preparations for a potential initial public Earl Jarrett Crypto Assets Chief Executive Officer, Q offering in the United States, and Nubank, which announced The Jamaica National Group Not Legal Tender: $750 million in funding, including $500 million in investment from U.S. Mexican Financial Thomas Morante billionaire Warren Buffett’s Berkshire Hathaway. What forces are driving Attorney Authorities Carlton Fields IPOs in Brazilian fintech and spurring investment in the sector? To what Mexican financial authorities Manuel Orozco extent will IPOs and investment rounds in Brazilian fintech accelerate Senior Fellow, issued a joint statement saying Inter-American Dialogue this year? How will the growth of Brazil’s fintech sector translate into cryptocurrencies are not legal Adalberto Palma-Gomez benefits for consumers? tender in Mexico. The statement Senior Partner, followed remarks by billionaire Proxy, Gobernanza Corporativa Ricardo Salinas Pliego, who said Rodolfo Pittaluga Helen Harris, senior research associate at McLarty Asso- his Banco Azteca could start Adjunct Professor, ciates: “The recent announcement of IPOs and investment using Bitcoin. Florida International University Page 2 College of Law rounds in Brazilian fintechs reflects the industry’s growth Fabian Saide potential. The Brazilian fintech market is one of the fast- Founder, CEO and President, A est-growing industries in the region, receiving $1.9 billion in investments Paykii in 2020, a 72 percent increase from 2019. Brazil’s vast population, wide- Roberto Teixeira da Costa Founder & Board Member Emeritus spread use of mobile devices and limited access to traditional banking CEBRI services make for an appealing market. These factors, combined with Mario Trujillo CEO, the push toward digitalization caused by the pandemic, favors fintechs. DolEx Dollar Express The boom in Brazil’s fintech sector has benefited consumers, providing a means for the 34 million unbanked Brazilians to access financial services in a competitive fashion. Through fintechs, they gain access to credit, savings and a vast array of financial services, allowing them to become incorporated into the formal economy and contribute to economic growth. The Brazilian government has supported this development, approving Salinas // File Photo; facebook Page of Ricardo Salinas Pliego. Continued on page 3 COPYRIGHT © 2021, INTER-AMERICAN DIALOGUE PAGE 1 FINANCIAL SERVICES ADVISOR June 17-30, 2021 BANKING NEWS FINANCIAL TECHNOLOGY NEWS NEWS BRIEFS Brazilian Exporters Mexican Start-Up Mexican Financial Authorities Say Crypto Allege Manipulation Credijusto Buys Assets Not Legal Tender in Suit Against Banks Banco Finterra Mexican financial authorities said June 28 that cryptocurrency assets are not legal tender Some of Brazil’s largest exporters are demand- Credijusto, a Mexico-based small-business in Mexico and that financial institutions that ing 19 billion reais ($3.77 billion) in a lawsuit lender, has bought local bank Banco Finterra in operate with them could face sanctions, against several domestic and foreign banks, al- what Credijusto said was the first acquisition Reuters reported. The joint statement, issued leging that they manipulated foreign exchange of a bank by a Mexican financial technology by Mexico’s central bank, the country’s finance rates, Reuters reported June 16, citing court start-up, Reuters reported June 15. The acqui- ministry and its banking regulator, followed a documents. The AEB exporters association sition, which was underway for a year and a statement by billionaire Ricardo Salinas Pliego, originally filed the lawsuit in 2018 but did not half, recently closed. The deal was worth less who said his financial unit, Banco Azteca, could specify the amount it was demanding from than $50 million, but the combined assets of start using Bitcoin. Such a move would make the banks. The association now alleges that the companies are worth approximately $300 Banco Azteca the first in Mexico to use the Brazil-based exporters suffered losses of 107.4 million, Credijusto’s co-chief executive, David digital currency. Earlier in June, El Salvador’s billion reais due to the banks’ purported ma- Poritz, told Reuters in an interview. Through the Legislative Assembly approved a measure tout- nipulation of currencies in 2010 and 2011. Bra- deal, Credijusto is planning to increase its ser- ed by President Nayib Bukele to make Bitcoin zilian banks face a “real threat” of losses due vices for Mexican companies that sell goods legal tender in the country. to the lawsuit, XP Investimentos told clients to the United States, he said. The fintech also in a note, The Rio Times reported. AEB, which is seeking to serve U.S.-based companies that represents 50 companies, calculated that it have trade with Mexico and other countries represents 20 percent of exporters in the South in Latin America, Poritz added. “There are tre- Venezuela Asks Local American country, Reuters reported. Banks that mendous financing needs for small businesses Banks to Pay for Vaccines are named in the lawsuit include Itaú Unibanco, exporting into the United States, and vice Venezuela, whose access to the global Banco Santander Brasil, Citigroup and BNP versa,” he said, adding that Credijusto is hoping financial system is restricted due to sanctions, Paribas, Reuters reported. Citigroup told the to grow its portfolio into the billions of dollars has asked some private local banks to pay for wire service that it follows the rules, Bradesco across the region in coming years. Combined, Covid-19 vaccines on the government’s behalf, declined to comment, Santander said it had Credijusto and Banco Finterra have loaned in Reuters reported June 21, citing two unnamed not been informed of the suit, and Itaú said excess of $2 billion to small and medium-sized sources familiar with the matter. The banks it would contest the allegations. Other banks businesses, Poritz added. In the next couple of reportedly used foreign currency to pay the named in the lawsuit, which local newspaper years, Credijusto might consider a bank acqui- Covax initiative for the vaccines. Valor Econômico reported on June 15, did not sition in the United States, Poritz added. “It’s a respond to requests for comment by the wire very logical evolution,” he told Reuters. [Editor’s service. AEB believes that a cartel of banks note: See Q&A on private-sector lending in manipulated exchange rates from 2008 to Mexico in the May 6-19 issue of the Financial Mastercard, LATAM 2012, but the organization has not yet been Services Advisor.] Airlines Sign Seven-Year able to calculate the extent of alleged damages Partnership Agreement during that entire time, said AEB attorney Bruno Maggi. In a separate lawsuit filed in April, Brazil’s Nubank Mastercard and Chile-based LATAM Air- Brazilian state oil company Petrobras made Seeking Investment lines Group on June 23 signed a seven-year similar allegations. Brazil’s antitrust agency, partnership agreement in which they will Cade, is also investigating banks’ potential Banks for IPO: Report introduce new credit cards and benefits for manipulation of currencies, Reuters reported. A frequent travelers, the companies said in a global foreign exchange scandal has resulted Brazilian digital bank Nubank, which was joint statement. The first phase of the deal in banks being penalized billions of dollars recently backed by U.S. business magnate War- will expand the benefits of LATAM Pass credit worldwide. Alleged widespread manipulation in ren Buffett’s Berkshire Hathaway, is reportedly cards in Chile, Argentina, Brazil and Ecuador. the spot foreign exchange market first came to looking for investment banks to help manage The second phase, which will start later this light in 2013. an upcoming initial public offering in the United year, will expand to other markets in the region, the companies said. COPYRIGHT © 2021, INTER-AMERICAN DIALOGUE PAGE 2 FINANCIAL SERVICES ADVISOR June 17-30, 2021 States, Reuters reported June 21, citing people FEATURED Q&A / Continued from page 1 familiar with the matter. The sources said the Brazilian