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In Latin America, entrepreneurs and investors try to balance caution and optimism • Technology Flow

“Cautious Optimism”. The state of mind of entrepreneurs and investors in Latin America today in an uncertain global scenario.

In this year’s Latin America Digital Transformation Report, the investment team at Atlántico describes how the region is leaving its rearview, mirroring a decade-long boom in technology value creation. With a record $16 billion in venture funding in 2021, a nearly four-fold increase over the previous year, Latin America is on the global stage. Although we see total funding halved this year, the region still has higher investment volumes than any year before 2021, fueling “cautious optimism”.

The past five years have seen the birth of Latin America’s first unicorns, marking a long-awaited inflection point in the digital transformation of a region of more than 650 million people.

Now, with the dust of the market turmoil still settling, local players are wondering how to play their hand: Ignoring calls for austerity would mean squandering the gains from these golden years, but not capitalizing on the region’s unique post-pandemic status. Leave a lot of money on the table.

In recent months, we’ve seen the pandemic-fueled boom in technology adoption in the US and other developed markets begin to falter. Pandemic-era market darlings, from Shopify to Peloton, have been forced to cut headcount as usage levels return to the pre-pandemic historical trend line.

The persistence of Latin America’s digital gains is perhaps most evident through the enduring gains in e-commerce penetration.

Typically, Latin America has not suffered through this hangover from digital adoption. Instead, a seemingly permanent two- to three-year gain can be observed across a wide range of indicators of tech adoption: e-commerce penetration, grocery delivery volumes, and digital banking and telemedicine use all continue to grow rapidly beyond the 2020 stage. – Function gains.

Online share of retail vs. pre-pandemic trend, US vs. Brazil.

Online share of retail vs. pre-pandemic trend, US vs. Brazil. Image Credits: Atlantico

Caution in an uncertain world

Uncertainty is still the order of the day in markets around the world as tech companies and investors try to figure out how to weather the storm. After a long period of excess liquidity and low interest rates, inflation finally showed up to party, leading central bankers to slam on the brakes.

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