The Brazilian economic studies center Getúlio Vargas Foundation (FGV) released the results of the Economic Climate Index (ICE) of Latin America, which positions Paraguay as South America’s most favorable business climate.

The study indicates that, in general, the business climate in Latin America reached its best level in the last 11 years in the first quarter of 2024, according to the EFE news agency.

This is its best level since the first quarter of 2013 (109.8 points). Furthermore, this was the first time since 2018 that the Index remained within the so-called favorable zone (more than 100 points) for two consecutive quarters.

Brazilian numbers improve, but Paraguay boasts the best business climate in South America

According to the FGV, the improvement in the first quarter was driven by the good evaluation of Brazil, the largest regional economy, whose indicator rose from 100 points in the last quarter of 2023 to 114.6 in the first quarter of 2024.

The business climate improved in all countries in the region except Mexico, where it fell 27.5 units to 114 points, and Chile, where it fell 7.9 units to 72.7 points.

Paraguay tops the list with (154.6 points), followed by Uruguay (139.4 points) and Brazil (114.6 points).

The Index highlights that the other countries are in the zone considered unfavorable (below 100 points) despite the increase in their indicators: Peru, with 85.3 points; Colombia, with 72.8 points; Chile, with 72.7 points; and Ecuador, with 42.2 points.

Argentina’s indicator rose from 26.1 to 41.7 points with President Javier Milei’s first economic measures, and Bolivia’s indicator remained in last place, with 20.8 points.

The study points out the improvement in indicators. It reflects the upward revision of the projections for GDP growth in 2024 in three of the countries in the region: Uruguay, Chile, and Peru.

According to the new projections, Paraguay will grow the most this year, with a projected expansion of 3.9%, followed by Uruguay (3.2%) and Mexico (2.8%).

Unleash Your Growth Potential:
Attract Foreign Direct Investment (FDI)

Learn how our proven strategies bring international capital to your organization. Schedule a free consultation today to discuss your unique needs and discover how we can unlock your growth potential. 

Paraguay: South America’s Rising Star for Business?

While giants like Brazil and Argentina often dominate headlines about South American economies, Paraguay is quietly emerging as a potential frontrunner for attracting new businesses. Let’s explore the factors that contribute to making Paraguay the country with the best business climate in South America.

Economic Sectors and Industries

Paraguay boasts a diverse economic landscape. Agriculture remains a significant player, with soybeans, corn, and beef as major exports. However, the manufacturing sector is experiencing a boom, particularly in food processing, textiles, and auto parts. The Paraguayan maquiladora industry holds significant economic promise, driving job creation, exports, and economic diversification. Here’s a breakdown of its importance:

• Export Growth: Maquiladoras typically focus on assembling imported components for re-export. This translates to increased exports for Paraguay, generating foreign currency and boosting the overall economic activity.
• Economic Diversification: Paraguay’s economy has traditionally been heavily reliant on agriculture. The maquiladora industry offers an opportunity to diversify the economy, reduce dependence on agricultural products, and foster growth in the manufacturing sector.
• Strategic Trade Partnerships: Paraguay’s free trade agreements with Brazil and Argentina, particularly for auto parts, incentivize maquiladoras to set up shop in the country. This allows them to export finished goods to these large markets without tariffs, creating a win-win situation for Paraguay and the established manufacturers in neighboring countries.

Workforce Composition

Paraguay has a growing young population with a median age of around 30. This translates to a readily available workforce that is eager to learn and adapt and is one of the reasons that Paraguay boasts the best business climate in South America. The education system is also undergoing reforms to equip graduates with the skills needed to thrive in the modern workplace. This combination of a youthful population and a focus on education positions Paraguay for future solid economic growth.

Government Policies for Business

The Paraguayan government has actively implemented policies to attract foreign investment and to create the best business climate in South America. These include:

• Low Tax Regime: Paraguay offers one of the most competitive tax rates in the region, with a corporate income tax of only 10%.
• Free Trade Agreements: Paraguay enjoys access to major markets through participation in trade agreements with Mercosur (Southern Common Market) and the European Union.
• Streamlined Business Registration: The government has simplified the business registration process, making it faster and easier for entrepreneurs to start.
• Investment Incentives: Paraguay offers tax breaks and other incentives for businesses operating in specific sectors, such as manufacturing and export-oriented industries.

Don't Miss Out: Limited Spots Available for Free FDI Strategy Sessions

Foreign Direct Investment can fuel your organization's success. But competition is fierce. Secure your spot today for a free, no-obligation consultation with our FDI experts. Learn how to attract global investment and take your business to the next level.

Geographic Advantage

Paraguay’s central location within South America offers a distinct logistical advantage. Businesses can leverage this position to efficiently access and distribute goods throughout the continent. Additionally, the abundant hydropower resources from the Itaipu Dam provide a reliable and relatively inexpensive industry energy source.

Paraguay’s combination of a growing economy, business-friendly policies, and strategic location makes it home to the best business climate in South America. While challenges remain, the Paraguayan government’s commitment to creating a favorable business environment suggests that this South American nation has the potential to become a significant economic player in the coming years.

Is Paraguay right for your business?

Carefully consider your specific industry’s needs and research the current market landscape in Paraguay. Consulting with international trade and investment experts at LATAM FDI can also provide valuable insights. Paraguay might be the business location you’ve been searching for in South America.

In summary, Paraguay has firmly established itself as a top contender for business ventures within South America. With a diverse economic landscape, a young and educated workforce, and government policies to foster a favorable business environment, Paraguay offers significant opportunities for growth and expansion. As businesses evaluate potential markets, Paraguay’s reputation as the country with the best business climate in South America makes it a compelling choice for investment and strategic expansion initiatives.

The Uruguay XXI business climate survey results reveal progress in creating a favorable business climate for foreign investors in Uruguay.

A  Uruguay XXI business climate survey of foreign investors shows that Uruguay is increasingly favorable to their interests, although some structural challenges persist. This improvement is reflected in the level of global satisfaction with the country to develop business activities: the number of compliant companies expressing a favorable perception of the country’s business climate was 47% in 2018. This figure rose to 84% in 2023, surpassing 2015’s 76%.

The perception is that the country’s economic situation has improved

The report describes the survey’s main findings as “general improvement in perceptions of the country’s economic situation.” The Uruguay XXI Investment Promotion Institute and the consulting firm Equipos carried out the exercise. The Uruguay XXI business climate survey results were released on Wednesday, March 13, 2024.

The improvement in positive evaluations among foreign investors is more pronounced than in the other audiences analyzed. The “high levels of satisfaction” with Uruguay as an investment destination are observed in all business segments. However, they are comparatively lower in large companies that export goods and are linked to the industrial sector.

The Uruguay XXI business climate survey best evaluated the following activity sectors: “Other services” (97%), “Information and communication” (94%), “Infrastructure” (90%), and “Commerce, restaurants and hotels” ( 89%).

Only 5% of the companies surveyed say they are dissatisfied with the country for the development of their activity. The “country cost” and “bureaucracy” are the main reasons for dissatisfaction.

Unleash Your Growth Potential:
Attract Foreign Direct Investment (FDI)

Learn how our proven strategies bring international capital to your organization. Schedule a free consultation today to discuss your unique needs and discover how we can unlock your growth potential. 

The Uruguay XXI Business Climate Survey cites legal security and stability as important positives

On the other hand, Uruguay’s “very good evaluation” of the investment climate continues to be supported by the country’s legal security and stability. The ranking follows these elements by tax incentives, tax exemptions, and the country’s free exchange market.

The Uruguay XXI business climate survey improves in all specific aspects of the investment climate compared to the previous market study. It stands out positively that 44% of the firms surveyed plan to increase their investment in Uruguay in the next five years.

The United States (22%) and Argentina (21%) are the countries that lead the origin of foreign capital. The installation modality of foreign direct investment is through new ventures (57%), the total acquisition of an established company (20%), and the third most frequently used form is the majority investment in an existing company (6%).

Foreign investors indicated that they are interested in investing in digital transformation (50%), sustainability (49%), and innovation (43%) in the coming years.

Foreign direct investment in Uruguay is at healthy levels

When presenting the data from the Uruguay XXI business climate survey, Foreign Minister Omar Paganini highlighted that in 2022, foreign direct investment stood at USD 31.1 billion and that in 2023, USD 3.7 million entered the country. This means that Uruguay will be reaching “maximum levels” in 2023. “We are in a good moment for foreign investment, which also has to do with the rules of the economic game and the macroeconomic stability that the Ministry of Economy has promoted,” Paganini highlighted at a press conference.

However, Uruguay still maintains evaluated aspects with low satisfaction values (less than 50%) that must be addressed. Some demonstrate structural criticism of the investment climate. These issues refer to “costs,” mainly energy and fuel but also human resources, ports, and airports. Another structural problem of the country is the need for more sufficient air, sea, and river connectivity.

Another criticism is the timing and ease of the procedures and processes for the installation and start-up of a company. Also, there are some questions about the conditions of access to markets and language management in Uruguay.

The Minister of Industry, Elisa Facio, commented that her portfolio is working on the opening of new markets with the rest of the national government.

In conclusion, the Uruguay XXI business climate survey underscores a notable improvement in foreign investors’ perceptions of Uruguay’s business environment, reflecting a positive trajectory in fostering international interest. While challenges persist, particularly regarding costs, bureaucracy, and connectivity, the country’s commitment to legal security and stability remains a cornerstone of its appeal. With a sizable portion of surveyed firms expressing intent to increase investment in the nation over the next five years, coupled with initiatives targeting digital transformation and sustainability, Uruguay stands poised to leverage its strengths and address areas for enhancement in its pursuit of sustained economic growth.

During 2024, the Ministry of Economy (Mineco) seeks to achieve a goal of foreign direct investment in Guatemala of 1.4 billion dollars. Of this total, 381 million dollars are expected in new investment attraction to the country to create at least 12,900 formal jobs for Guatemalans.

Business climate

The Minister of Economy, Gabriela Garcia-Quinn, highlighted that work is also being done to strengthen a favorable business climate. The objective is to support all sectors by constructing a stable and modern framework to encourage investment and competition.

The lines of collaboration established in “Guatemala no se detiene (Guatemala does not stop)” will be followed through programs that seek further digitization and simplification of the procedures required to do business in the Central American nation.

The goal is establishing Mineco as an effective, efficient, and transparent facilitator for attracting increased foreign direct investment in Guatemala. The objective is to improve the population’s well-being and quality of life.

The companies

Minister García-Quinn highlighted that 48 international companies have demonstrated their interest in investing in Guatemala, which is based on sectors such as:

Agribusiness

Guatemala’s agribusiness sector stands as a cornerstone of its economy, offering lucrative opportunities for foreign direct investment in Guatemala. Renowned for coffee, sugar, and banana exports, the sector benefits from fertile lands and a favorable climate. The government’s initiatives to support agricultural development further enhance its appeal. With a focus on sustainability and modernization, agribusiness in Guatemala presents a promising landscape for investment, driven by robust export markets and a skilled workforce. This sector contributes significantly to Guatemala’s economy and showcases the country’s potential as a leading agricultural hub in the region.

Vehicle electrical parts

Guatemala’s vehicle electric parts production sector is emerging as a promising industry within its diverse economy. With a strategic location and proximity to major trading partners like the United States and Mexico, Guatemala offers efficient access to global markets. The country’s skilled workforce and favorable business climate attract international companies seeking to invest in producing electric vehicle parts. This sector presents opportunities for growth and innovation, supported by government initiatives and a commitment to modernization. As part of Guatemala’s efforts to diversify its industrial base, vehicle electric parts production holds the potential for job creation and economic development, positioning Guatemala as a competitive player in the automotive supply chain.

Unleash Your Growth Potential:
Attract Foreign Direct Investment (FDI)

Learn how our proven strategies bring international capital to your organization. Schedule a free consultation today to discuss your unique needs and discover how we can unlock your growth potential. 

Pharmaceutical products

Guatemala’s pharmaceutical products production sector is poised for growth and investment within the country’s expanding industrial landscape. With a strategic location and access to critical markets, Guatemala offers an advantageous platform for pharmaceutical manufacturing. The sector benefits from a skilled workforce and government support, fostering an environment conducive to innovation and competitiveness. As demand for healthcare continues to rise domestically and globally, Guatemala’s pharmaceutical industry stands ready to meet these needs, contributing to economic development and job creation while ensuring access to essential medicines for the population.

Clothing and textiles

Guatemala’s clothing and textile production sector is vital to its economy and is renowned for its high-quality products and competitive advantages. Situated strategically with access to major markets, foreign direct investment in Guatemala offers an efficient platform for manufacturing and exporting textiles and garments. The sector benefits from a skilled workforce, government support, and a strong tradition of craftsmanship, ensuring product excellence and reliability. With a focus on sustainability and innovation, Guatemala’s clothing and textile industry continues to attract investment and contribute significantly to the country’s economic growth. Its global reputation for quality and reliability positions it as a critical player in the international textile market.

BPO and Contact Center

Guatemala’s BPO and contact center industry is rapidly emerging as a key player in the global outsourcing market, propelled by a skilled workforce, favorable business environment, and strategic location. With a focus on providing high-quality services in customer support, technical assistance, and back-office operations, Guatemala offers cost-effective solutions for businesses worldwide. The sector benefits from government support and investment in infrastructure and technology, enhancing its competitiveness and attracting international companies seeking outsourcing opportunities. With a commitment to excellence and innovation, Guatemala’s BPO and contact center industry are poised for continued growth, driving economic development and creating employment opportunities for its workforce.

Plan for the economy

The Ministry of Economy is developing the National Strategy to Attract Foreign Direct Investment in Guatemala. The government seeks to become a key actor in strengthening confidence in Guatemala as an attractive country for investment and foreign trade.

For this reason, Minister Garcia-Quinn asserts: “To comply with this action plan for the Guatemalan economy, we commit to working transparently, overcoming challenges, and enhancing our business opportunities in Guatemala and the world.”

Why Guatemala Should Be Your Next Investment Destination

Central America’s hidden gem, foreign direct investment in Guatemala, is rapidly emerging as an attractive option. Here’s why:

Strategic Location: Guatemala is geographically privileged and located between North and South America. It shares a border with Mexico, a major US trading partner, and has easy access to the Atlantic and Pacific Oceans. This translates to efficient shipping routes for reaching major global markets in the US, Europe, and Asia. Additionally, well-developed seaports like Puerto Quetzal on the Pacific and Santo Tomas de Castilla on the Atlantic facilitate smooth import and export operations.

Workforce Advantage:  Guatemala boasts a young, skilled, and multilingual workforce. The country has a median age of 22, with a growing population eager for employment opportunities. The government actively invests in education and vocational training programs, ensuring a steady stream of qualified personnel for various industries. Furthermore, Guatemala’s proximity to the US fosters a bilingual population, making communication and business operations seamless.

Diversified Economic Landscape: Guatemala offers a well-rounded mix, unlike economies reliant on a single industry. Agriculture remains a strong pillar, with exports like coffee, sugar, and bananas contributing significantly. The manufacturing sector is flourishing, attracting foreign investment in textiles, apparel, and automotive parts. The service industry is also on the rise, with strong growth in tourism, business process outsourcing (BPO), and IT services. This diversification offers investors a more comprehensive range of opportunities and mitigates risk by not solely relying on one sector’s performance.

Business-Friendly Climate:  The Guatemalan government actively promotes foreign investment. Investment-friendly policies like tax breaks, streamlined business registration processes, and free trade agreements with major economies make it easier for foreign companies to establish themselves. Additionally, the government offers incentives for specific sectors like tourism and manufacturing, further sweetening the deal for potential investors.

Beyond the Basics:  Guatemala offers additional advantages that enhance its attractiveness. The cost of doing business in Guatemala is lower compared to many developed nations. Furthermore, the country boasts a rich cultural heritage and stunning natural beauty, making it a desirable destination for expatriate employees.

In conclusion, foreign direct investment in Guatemala presents a compelling case, aiming to attract $1.4 billion in 2024. With a strategic location, skilled workforce, diversified economy, and supportive business climate, it offers promising opportunities across various sectors such as agribusiness, manufacturing, and services. The government’s commitment to improving the investment environment underscores its dedication to economic growth and development. As a hidden gem in Central America, Guatemala offers favorable business conditions, cultural richness, and natural beauty. Investing in Guatemala is not just a financial opportunity but is also an investment in the country’s promising future.

Don't Miss Out: Limited Spots Available for Free FDI Strategy Sessions

Foreign Direct Investment can fuel your organization's success. But competition is fierce. Secure your spot today for a free, no-obligation consultation with our FDI experts. Learn how to attract global investment and take your business to the next level.

Inter-American Dialogue reports that Chinese investment in Latin America has been recently reduced to focus on critical areas such as energy, information, and communications technologies.

Chinese investment in Latin America has been reduced in the last four years as a result of the recalibration of the priorities of the communist regime and its companies abroad, reveals an investigation by the Inter-American Dialogue think tank.

The Washington, DC-based center reports that Chinese investment in Latin America reached $14.2 billion annually between 2010 and 2019 but fell to an average of $7.7 billion from 2020 to 2021 and then to $6.4 billion in 2022.

The report cites that the Economic Commission for Latin America and the Caribbean (ECLAC) found that Chinese acquisitions of assets in Latin America in 2022 were the lowest in a decade, both in the number of projects and as a percentage of total mergers and acquisitions in the region. It placed itself behind companies from the United States, Australia, the European Union, Canada, and Chile.

However, the phenomenon is more than just regional. Professional services network EY estimated the value of total investment announced by China worldwide during 2022 at $29 billion, which represented a year-on-year drop of 52 percent.

Analysts attributed this drop to rising geopolitical tensions, related regulatory tightening, and rising global inflation, among other factors.

The refocusing of Chinese businesses

The study “New infrastructure: Emerging trends in Chinese foreign direct investment in Latin America and the Caribbean” was carried out by Inter-American Dialogue experts Margaret Myers, director of the Asia and Latin America Program, Ángel Melguiz and Yifang Wang, both of the Program Asia and Latin America.

Analysts indicate that China is now focusing on other priority areas that it describes as “new infrastructure.” For example, these industries, telecommunications, financial technology, and energy transition, are broadly related to innovation but are also a critical part of the Asian country’s economic growth strategy.

“Whether in terms of value or number of deals, Chinese Foreign Direct Investment (FDI) in these industries is on the rise, accounting for 58 percent (around $3.7 billion) of total annual Chinese FDI in the region” in 2022 and more than 60 percent of the total number of FDI deals announced by Chinese companies that year,” the report notes.

Inter-American Dialogue experts point out that, generally, the types of large-scale infrastructure projects that once characterized the Belt and Road Initiative (BRI) are no longer as emblematic within China’s foreign investment policy in Latin America and the Caribbean (LAC).

“In many parts of Latin America and the Caribbean, Chinese interest in canals, railways, and other major transport and energy infrastructure is being replaced by a growing emphasis on innovation, whether in information and communications technology (ICT), renewable energy or other emerging industries, consistent with Beijing’s laser focus on its own economic improvement and global competitiveness,” the report highlights.

The Inter-American Dialogue study warns that Chinese companies often seek more significant commitment to Latin America and the Caribbean through smaller agreements on average and in sectors that are directly aligned with Beijing’s economic growth objectives.

Chinese investment in Latin America in the energy sector

Chinese mergers and acquisitions in Latin America and the Caribbean are now limited primarily to the utility electricity generation and transmission industries.

Luz del Sur, Peru’s largest utility company, is responsible for supplying electricity to the south of Lima and surrounding areas, and it was purchased by China Yangtze Power International (Hong Kong).

In Chile, China Southern Power Grid bought a stake in the energy transmission company Transelec in 2018, and State Grid purchased the energy distributor Chilquinta Energía in 2019 and CGE in 2020.

Electric generation and transmission deals accounted for nearly 74.4 percent of total M&A transactions over the past five years and a significant amount ($16.9 billion) of the Chinese total.

China’s focus on renewable energy, an innovation-related industry, accounted for more than 6 percent of the total value of FDI announcements from Latin America and the Caribbean between 2018 and 2023.

Information and Communications Technologies

In addition, China is betting on investments in Information and Communications Technologies (ICT) in the region. Deals in this sector accounted for 40 percent of total Chinese FDI in Latin America between 2018 and the first half of 2023. However, it only represents 8 percent of the total value of Chinese investments globally.

The report details an upward trend in Chinese FDI in Latin America’s “new infrastructure” industries, with ICT, renewable energy technology, and, increasingly, electric vehicles accounting for most of these investments.

The study indicates that conditions in Latin America and the Caribbean are relatively ripe for Chinese ICT investment, including a substantial consumer base with high demand for affordable digital equipment and services.

“Whether in terms of value or number of deals, Chinese FDI in these industries is increasing and accounted for 58 percent (around $3.7 billion) of the annual total in the region in 2022 and more than 60 percent of the total number of FDI agreements announced by Chinese companies that year,” the report determines.

New investments in equipment, consumer electronics, satellites, services, and computing exist.

“As geopolitical conditions limit China’s technology investments and trade prospects in developed country markets, many of China’s manufacturing and  Information and Communications Technologies companies have sought to engage more broadly with Latin America, the Caribbean, and other parts of the Global South,” the report says.

The study concludes that China’s major technology suppliers are moving beyond equipment sales, which were the original basis of Huawei’s operations in Latin America, and are now rapidly expanding their focus to include data centers, cloud, and other services, especially in Argentina, Brazil, Chile, Colombia, Mexico, and Peru.

Focus on the biggest country

The Inter-American Dialogue study indicates that Chinese investment in Latin America continues to be overwhelmingly focused on the largest economies in the region, such as Brazil, which absorbed a large part of Chinese FDI in LAC between 2003 and 2010.

In 2022, China also bet on Brazil with 78.6 billion dollars, 42 percent of the total for Latin America.

“Chinese FDI in Brazil between 2003 and 2022 was more than double the investment in Peru, the second largest recipient of Chinese FDI during that period,” the report explains.

However, the relative importance of Brazil as a destination for Chinese investment in Latin America has decreased in the last five years in favor of Chile, Peru, and Mexico. The report notes that this reflects political tensions between China and Brazil under the Jair Bolsonaro administration but may also be due to changes in investment conditions or projects or industries of interest in other parts of LAC.

The American warning

The report recalls that the United States and some like-minded partners have warned about over-dependence on Chinese investment in Latin America and influence across the entire “digital stack” (network infrastructure, devices, applications, content, and governance), highlighting the need for interoperability and pointing to the prospect of repurposing digital technologies and infrastructure to enable the suppression of civil society.

In Latin America and the Caribbean, the United States has called for robust consumer protection frameworks to reduce the space for impunity and rights abuse, whether at the behest of state or non-state actors.

Will they give more to the region?

The report states that China is giving signs that it will penetrate further into the region. As proof of this, it cites Xi Jinping’s conversations in November 2023 with presidents Dina Boluarte of Peru, Luis Lacalle Pou of Uruguay, and Gustavo Petro of Colombia, and his April 2023 meeting with Brazilian President Luiz Inácio Lula da Silva.

Those meetings all focused on expanding the already extensive trade relations while encouraging cooperation in sectors related to innovation in these countries, including urban mobility systems in Colombia, the pharmaceutical sector in Uruguay, the digital economy, energy and mining in Peru, and 5G telephone technology in Brazil, among other areas.

According to experts, these and other countries in the region should expect a certain degree of Chinese economic commitment in the coming months and years, although mainly in sectors aligned with China’s economic improvement process, not precisely that of Latin America and the Caribbean.

In conclusion, the shifting landscape of Chinese investment in Latin America reflects a strategic recalibration towards sectors integral to China’s domestic economic agenda, such as energy, information, and communications technologies. While traditional infrastructure projects under initiatives like the Belt and Road Initiative have waned, emerging industries like renewable energy and ICT are witnessing a surge in Chinese interest. Despite geopolitical tensions and regulatory constraints, recent engagements signal a continued, albeit targeted, commitment from China to deepen economic ties with the region. As Latin American countries navigate these evolving dynamics, they anticipate a nuanced influx of Chinese investment, emphasizing alignment with China’s economic priorities alongside their development objectives in the years ahead.

The Fintech industry in Latin America has experienced exponential growth in recent years. In 2022, the sector received an investment of more than 1.6 billion dollars, 120% more than the previous year, according to a study by the Inter-American Development Bank (IDB).

The Fintech industry in Latin America has experienced exponential growth in recent years. In 2022, the sector received an investment of more than 1.6 billion dollars, 120% more than the previous year, according to a study by the Inter-American Development Bank (IDB).

This development is due to a series of factors, such as the growing adoption of technology by consumers throughout the region, the need for financial inclusion, and favorable regulation of the sector.

These are four trends that will define the Fintech industry in Latin America in 2024:

Growth of digital payments

Digital payments will continue to increase in popularity in Latin America. According to a study by the consulting firm McKinsey, the value of digital payments in the region will reach 2.5 trillion dollars in 2025. This trend is mainly due to the following variables:

• Greater penetration of smartphones
• Improvement of telecommunications infrastructure
• Growing adoption of contactless payment solutions

Development of open banking

Regarding banking, Mario Aranda, General Manager of Ionix Colombia, stated that some of his target clients are in this sector since the trend is gaining more and more strength in the Latin American territory. This initiative allows users to share their financial data with authorized third parties, such as Fintech companies, to access new financial products and services. “One of the relevant aspects of Fintech is collaboration. It is a new dimension that is not traditional in this financial world,” commented Mario Aranda, General Manager of Ionix Colombia.

The growth forecasts are very optimistic. According to the Open Banking Report Market by Finance Services and Distribution Channel by Allied Market Research, the open banking market in the world is expected to reach $43.2 billion by 2026.

Three factors that will drive its development are:

1. An increase in digital banking adoption
2. Collaboration between Fintech companies and traditional banks
3. Greater demand for inclusive financial services

The analyses indicate that new banks and the Fintech industry will adopt this initiative, leading to new innovative financial products and services.

Cryptocurrency boom

Cryptocurrencies are also gaining popularity in Latin America, as 46% of banked people in the region are willing to make payments with Bitcoin.

Cryptoasset companies are gradually evolving into comprehensive financial technology providers that act as one-stop shops for investors, consumers, and other companies.

Money transfers and payment processor services are the activities that are most carried out through payments in cryptoassets. In 2024, it is estimated that the number of users will increase considerably, as will the companies that adopt them in their financial processes.

Attention to small and medium-sized businesses

The integration of Fintech business models can offer several benefits for small and medium-sized businesses in Latin America, including:

• Technological modernization: They can help companies modernize their financial processes and systems, improving efficiency and competitiveness.
• Greater access to financial services: Fintech business models can offer electronic payment solutions, personal and business finance management, transfers, and remittances, among other services.
• Process optimization: Fintechs can help optimize financial processes, improving their efficiency and reducing costs.
• Greater flexibility: Fintech companies can offer more flexible and personalized financial solutions than those offered by traditional banks, which can better adapt to the needs of companies.

Under this context, Mario Aranda assured that Ionix is an excellent ally for small and medium-sized companies in Colombia and Latin America, with different service models and financial ecosystems that could be optimized according to each.

“Iconix’s target clients are found in banking, insurance companies, organizations in the retail sector, and, in general, entities with high transactionality and a large volume of users, where the number of transactions means that they require many aspects of security and need access to data related to reconciliation or risk measurement in open banking issues. This is where Ionix presents itself as a response to a strong growth in the population that is now immersed in the internet and the use of technologies and mobile devices,” added Mario Aranda.

It is expected that in 2024, the Fintech industry in Latin America will focus on meeting the needs of SMEs. These companies dedicated to financial solutions will launch new developments adapted to the needs of small and medium-sized businesses, such as loans, insurance, and financial management services.

Regulation, a pending issue

The regulation of Fintech in Latin America is in the process of evolution. In recent years, governments in the region have taken steps to create a regulatory framework that promotes financial innovation and protects consumers. The following factors are being taken into account:

• Consumer protection
• Promotion of innovation
• Equity

Some countries in Latin America, such as Brazil and Mexico, have enacted specific laws to regulate Fintech activities. Others, such as Colombia and Argentina, have taken a more pragmatic approach, incorporating Fintech activities into existing regulations. Furthermore, due to the sector boom, other nations are expected to join in regulating these companies.

The fintech industry in Latin America has a vital role in developing the region’s economy. In 2024, the sector is expected to continue increasing, driven by several trends, such as the growth of digital payments, the development of open banking, the rise of cryptocurrencies, and the focus on SMEs.

In conclusion, the fintech industry in Latin America is poised for continued growth and innovation in 2024 as it navigates through an evolving landscape shaped by technological advancements, regulatory developments, and shifting consumer preferences. With a focus on digital payments, open banking initiatives, the burgeoning cryptocurrency market, and tailored support for small and medium-sized enterprises, fintech companies are primed to transform the region’s financial services landscape. As governments work towards establishing comprehensive regulatory frameworks, the industry stands ready to drive financial inclusion, promote innovation, and contribute significantly to the economic development of Latin America.