Latin America Business: Best in 2021

The best news in Latin America business in 2021.

BY LATINVEX EDITORS

The best events in Latin American business this year, according to Latinvex editors.

#1 Nubank, Brazil IPO Success

For the second year in a row, Brazil surprised with a wave of initial public offers, which culminated with the long-awaited $2.6 billion offer from Brazilian digital bank Nubank – the largest Latin American IPO since 2018, according to Latinvex data.

However, the boom was largely during the first half of the year as a combination of political noise, economic slowdown and high inflation slowed down activity in the second half. (See Latin America Business: Worst in 2021).

Nubank has the highest market capitalization among Latin American listed banks and the 4^th-highest among Brazilian companies, G1 reports. As a result of the successful leadership at Nubank, Latinvex named David Velez CEO of the Year.

#2 Latin America M&A Recovery

Mergers and acquisitions in Latin America saw a strong comeback this year after declining 48 percent last year.

The combined value of Latin America M&As reached $105.5 billion during the first nine months this year, a 178% increase from the same period last year, according to Refinitiv. It’s also the highest volume in a decade, according to Reuters.

Brazil M&As soared 235 percent during the first nine months compared with a 50 percent fall during the full year 2020.

#3 Petrobras Recovery

Brazilian state oil company Petrobras – the top company on the Latinvex 500 -- made a strong comeback this year, with net income during the first nine months of $11.3 billion compared with a $2.6 billion loss in the same period last year and full-year 2020 losses of $1.4 billion.

In a relief for investors, the company has also been able to remain stable despite a controversial CEO change in February when Brazilian President Jair Bolsonaro sacked the well-respected chief executive Roberto Castello Branco and replaced him with army reserve general Joaquim Silva e Luna. Even better, Silva e Luna has proven himself to be independent from Bolsonaro and loyal to Petrobras staff and traditional market-friendly policies in recent years.

After Bolsonaro said Petrobras was too profitable, Silva e Luna said that Petrobras does not pursue "profit for profit's sake," but does so to give back to society in the form of taxation, investment and dividend payments, including to the federal government, its majority shareholder, according to Reuters.

Last week, Petrobras issued an official statement dismissing Bolsonaro’s attempts at changing the firm’s fuel price policy.

“Petrobras reiterates its commitment to the practice of competitive prices and in balance with the market, while avoiding the immediate pass-through of external volatility and of the exchange rate caused by circumstantial events,” it said in a statement.

#4 Ecuador Outlook Improves

After Guillermo Lasso became president in May 2021, Ecuador has dramatically improved its business climate. The former banker returned the country to The World Bank’s International Center for Settlement of Investment Disputes (ICSID) and is now opening up the oil sector to more foreign investment. He also has implemented a tax reform and submitted a bill to Congress for labor reform.

Ecuador formally returned to the ICSID in June after the government of then-President Rafael Correa left in 2017.

“Resolving grievances with foreign investors efficiently and fairly is critical to cultivating a competitive business environment,”  David Malpass, President of the World Bank Group and Chair of the ICSID Administrative Council, said in a statement. “I congratulate the Government of Ecuador on taking this important step and its renewed focus on private sector investment.”

Under an umbrella tax decree that took effect on November 29 reforms to hydrocarbons legislation allow the government to tender oil and natural gas fields operated by state-owned PetroEcuador and facilitate the migration of about 20 fee-based service agreements to production-sharing contracts (PSCs), Argus Media reports.

Lasso has made an ambitious pledge to double oil production to 1mn b/d during his four-year tenure.

Ecuador is also planning to boost renewable energy. The Ministry of Energy and Non-Renewable Natural Resources announced in July plans for a new tender for the development of PV, wind and biomass projects, as well as small hydroelectric plants, in several provinces throughout the country, PV Magazine reports.

To do this, it has increased the national renewables target from 200 MW to 500 MW. According to the International Renewable Energy Agency, the Latin American country had only installed 28 MW of PV capacity by the end of 2020.

Lasso also reached an agreement with the International Monetary Fund to revise Ecuador’s $6.5 billion Extended Fund Facility (EFF). The deal will unlock external funding and anchor a fiscal consolidation path that would greatly reduce financing needs and debt/GDP, according to Fitch Ratings.

The tax bill increases the number of businesses that will be subject to a special tax contribution of 0.8 percent for two years, in a bid to meet a Lasso campaign promise that those with the most earnings would pay more, Reuters reports.

The tax reform -- key to Lasso's re-negotiated financing deal with the IMF -- also includes increased tax obligations for those earning more than $2,000 a month by reducing the amount of health, education and other costs they can deduct. Individuals with a worth of more than $1 million and couples with a joint worth of more than $2 million would be subject to a one-time contribution under the reform.

The new labor regulations would seek to stimulate telecommuting and allow work hours to be distributed in different ways, Reuters reports. Unions have complained that the changes could undermine workers' rights, which Lasso denies.

#5 Dominican Success Story

The Dominican Republic, the 8^th-largest economy in Latin America, has been soaring this year, largely driven by a tourism boom despite the COVID pandemic and a continued strong mining sector.

The economy is expected to grow by 11 percent this year, according to estimates by the Central Bank.

That would be the best performance in nearly 30 years – since 1992, according to a Latinvex analysis of data from the International Monetary Fund.

During the first 11 months this year, the Dominican Republic received 4.2 million tourists, or 73% of pre-pandemic levels. Meanwhile, September, October and November all saw record high tourism arrivals, Tourism Minister David Collado announced.

Latinvex named Dominican President Luis Abinader Leader of the Year, in part because of his successfull stearing of the economy. 

© Copyright Latinvex