AREAS OF EXPERTISE
AGRIBUSINESS
Latin America is one of the largest producers and exporters of agricultural, livestock and forestry crops, with Mercosur being the 3rd largest producer of the five main global crops. Whereas, according to the United Nations (UN), the world population will increase from the current 7 billion to 8.9 billion inhabitants by 2050, and this population increase will lead to the consequent increase in food production, including the main food crops , further elevating the role of Mercosur as producer and exporter, which will be responsible for a large part of global supply.
In this sense, Brazil plays a fundamental role. According to estimates by the Confederation of Agriculture and Livestock of Brazil (CNA), the Gross Domestic Product of agribusiness will grow 3% in 2021, and the Gross Value of Agricultural Production (VBP) 4.2%. It is estimated that Brazil will reach record levels in grain production in the 20/21 harvest, with a projected production of 268.9 million tons, with soybean alone expected to be responsible for 135 million tons, which makes Brazil the world's largest producer of the grain.
FOOD & BEVERAGE
The food sector is one of the fastest growing in the world, especially in Latin America, whose share of the sector in the Gross Domestic Product of the member countries is relevant. The region is one of the most attractive in the long term in relation to this market. According to Statistica, in 2016, Latin America's food and beverage sector generated 193 billion dollars in revenue, and sales forecast are to reach 221 billion dollars in 2021.
In Brazil, the Brazilian food and beverage industry recorded growth of 12.8% in sales in 2020, compared to 2019, reaching the level of R$789.2 billion, added to exports and sales to the domestic market. This result represents 10.6% of the national GDP, according to a survey by the Brazilian Food Industry Association – ABIA. Despite the challenges caused by the pandemic for all sectors, the food industry maintained the volume of investments. These investments, including mergers and acquisitions, expansion of manufacturing plants, investment in R&D, acquisition of machinery and equipment, reached a volume of R$21.2 billion in 2020, which corresponded to 2.7% of the sector's total revenue of R$ $789.2 billion. Brazil is the second largest exporter of processed foods in the world, exporting to over 190 countries. The main markets in 2020 were Asia, Arab countries and the European Union, with 45.7%, 16.2% and 13.8% of exports, respectively. The main export destinations in 2020 were: China (US$8.2 billion), Hong Kong (US$1.9 billion), and the Netherlands (US$1.7 billion). Considering a gradual economic recovery in Brazil, associated with the country's ability to vaccinate a significant part of the population, in order to control the contamination by the Covid-19 virus, the estimate of the food industry is for growth above 3% of real sales in 2021.
RENEWABLE ENERGY
Renewable energy sources have played an extremely important role in the development of Latin America, whether to alleviate the energy crisis, resulting from the lack of investments, or by looking for sustainable alternatives for development worldwide. According to the Inter-American Development Bank (IDB), it is possible to supply all the electricity needs in Latin America using only renewable sources of resources (solar, geothermal, wave, wind and biomass). Thus, the investments to be made in the coming years will play an essential role in the development of the sector in the region.
According to the 2019 Global Status of Renewables Report by the United Nations Environment Program (UNEP), global investment in green energy exceeded US$2.6 trillion in the last decade. In terms of installed renewable energy capacity, Brazil ranks third in the world ranking, with 141,932 MW, followed by China, with 788,916 MW, and the United States, with 282,656 MW, according to data collected by the International Agency for Renewable Energy (IRENA).
According to Bloomberg, commercial projects are still scarce in Latin America, so auctions are critical for new investments and construction of clean energy. In addition, its structure in the project finance model offers revenue guarantees to developers and support to local supply chains. Therefore, the resumption of auctions is a fundamental sign of recovery and a strong indicator of the general stability of this sector.
ENTERTAINMENT
The global media and entertainment market will grow at an annual average of 4.2% over the next five years and by 2021 will reach $2.23 trillion, according to the 18th Global Entertainment and Media Survey 2017-2021, from PwC (“PwC Report”). In Brazil, revenue from the media and entertainment sector is expected to reach US$43.7 billion in 2021, with data consumption on mobile devices expected to grow 28% a year over the next five years. In this period, 177 million people are expected to be mobile internet subscribers in the country.
Also, according to the PwC Report, Brazil has become an important hub in the mobile gaming market, with an estimated growth of 26% per year, and projected revenue of US$712 million in 2021. In 2016, the sector's revenue was $220 million. Another prominent market in Brazil in relation to other Latin American countries is TV on demand. Consumer spending on TV channel subscriptions is expected to increase by 2.4% per year until 2021. The sector's revenue will go from US$6.2 billion in 2016 to US$7 billion in 2021. With growing consumer demand for new media, the attention of advertisers has turned to digital platforms. Internet advertising spending is expected to grow by 11.9% a year through the end of 2021 to $3.6 billion.
REAL ESTATE
The real estate sector is one of the fastest growing sectors in Latin America due to the fact that the emerging countries that make up this region are undergoing constant demographic changes, whose urbanization processes imply large investments in the area, necessary to keep up with the changes that are constantly carried out. The sector includes shopping malls, hospitals, hotels, commercial and residential projects, educational institutions, warehouses, among others. Projections made by the United Nations (UN) indicate that the world population will reach the number of 9 billion people in 2037. While in Europe and North America the population growth rates are forecasted are negative, the countries of Africa, Asia and Latin America will lead this new population increase in the world. This scenario represents an incipient opportunity for the housing, residential and social sector. In early 2020, without considering the pandemic scenario, Moody's estimated that, in Latin America, the industry could see growth of up to 6% in 2021.
According to McKinsey's “Brazil 2020 Opportunity Tree” report, after the recession in 2014-16, the Brazilian real estate market showed strong signs of recovery in property sales and launches, with an increase in confidence on the part of professionals and investors. construction, with the main construction players growing. Furthermore, factors such as low interest rates, higher disposable income and the capacity for new offerings have been the main drivers of growth in this sector. Data from the Brazilian Association of Real Estate Credit and Savings Entities (Abecip) show that the real estate market has proved resistant to the pandemic and has been showing an increase since the last half of 2020, with a 57.5% growth in financed amounts compared to 2019 .
INFRASTRUCTURE
Investments in infrastructure in Latin America are incipient in relation to the economic growth that has been seen in recent years. Only 3% of all the wealth generated by the countries of this region is destined to the sector, reason why its promotion is indispensable for developing nations. Investments in infrastructure contribute to raising the quality and quantity of public services and reduce logistic and mobility costs, facilitating the interaction between the goods and services, labor and financial markets.
According to PwC's “Infrastructure Spending and Major Projects-Trends 2025” report, infrastructure spending in Latin America is expected to increase progressively over the next decade, reaching about $557 billion annually by 2025. While the region's share of global spending is likely to decline, such Brazil, along with Chile and Colombia, is expected to increase its share of total regional spending. It is estimated that, in Brazil, spending on infrastructure will increase by an average of 6% per year over the next decade, reaching just over US$300 billion per year by 2025. With this, there will also be an extractive industry, boosted by the strong demand for commodities, by the development of pre-salt fields, and by the transport sector. Investments in highways in the country will more than double, from just under US$15 billion in 2010 to US$38 billion in 2025. In addition, transport spending is expected to reach around US$60 billion annually in 2025 , with a focus mainly on roads, including also railways and ports.
MINING
The large mineral reserves contained in South America make the region an important producing and exporting center for other countries, especially of ores such as niobium, lithium, copper, silver, iron ore, bauxite, gold and zinc. The infrastructure, construction and industrial production sectors, largely responsible for the socioeconomic development of nations, depend essentially on ores such as iron, aluminum and copper. South America is responsible for a large part of the world's silver production. Chile and Peru occupy, respectively, the first and third positions in world copper production. Brazil is the world's largest producer of niobium and ferro-niobium and is the only major producer of iron ore among Latin American countries. Brazil, Chile and Argentina are major exporters of lithium, whose reserves make up 86% of the total world reserves currently known. These reasons make the South American countries have constant plans for mining expansion, being constant targets of foreign investment.
According to the KPMG survey, mining companies are increasingly engaged with ESG principles, especially when it comes to climate change and meeting society's growing expectations. The survey also notes an increasing emphasis on environmental risks, including new regulations and sustainability. With future demand in most areas, mining companies are looking to focus on maintaining strong balance sheets to weather cyclical volatility, and the industry appears to be in a strong position to take advantage of the post-pandemic global recovery period. Commodity price volatility remains the main risk facing the sector, followed by economic slowdown and uncertainty.
TECHNOLOGY
Brazil represents a thriving market for startups and technology companies. Today, the ecosystem in Brazil is considered favorable for investors and the market to have security in fostering its development. All elements of the chain are present in this ecosystem, namely: innovative and disciplined entrepreneurs, angel investors, accelerators, venture capital companies, private equity groups, as well as state regulation, associations and operational infrastructure. The prospects for the startups and technology sector are even more positive with the current regulatory changes implemented to protect the figure of the angel investor (Complementary Law No. 155) as well as with regard to the regulation of equity crowdfunding (CVM Instruction 588). In addition, the transit of knowledge and people between Latin America and the United States (Silicon Valley, New York, Boston), China (Beijing) and Europe (London and Berlin), facilitates even more the adaptation of different business models already tested and of technologies in scale for startups and technology companies in Brazil, this being a business hub for all of Latin America.
The study “Latin American Digital Transformation Report 2021”, by the Atlântico investment fund, shows how the digital transformation process has been in Latin America in recent years. The market value of technology companies in the region went from 0.9% to 1.8% of the Gross Domestic Product - GDP between 2015 and 2019. In 2020, it reached 2.3%. In August 2021 it reached 3.4%. Brazil is at the forefront in the region: in 2020, the share of these companies in the national GDP was 2.8%. In 2021, this share should reach 4.5%. Brazil can be considered one of the main countries when it comes to representation in the technological universe. Among the sectors that have grown the most since the arrival of covid-19 are digital banking and e-commerce. While 42% of Brazilians already have a digital bank account, 13 million new consumers joined online commerce in 2020 — a growth of 29% compared to 2019. Complementary segments accompany this dynamic. To support e-commerce, for example, the logistics and payment areas also improved.
With the acceleration of the global digitization wave, the adoption and development of Artificial Intelligence (AI) has grown in Latin America. According to studies carried out by Everis and Endeavor, Brazil stands out with 42% of the initiatives in Latin America. The report was based on the fact that AI is currently the engine of technological transformation that will concentrate a large part of economic productivity and, therefore, of the growth of countries. One of the main findings of the study was that the use of these technologies grew from 32% in 2018 to 48% in 2020. In Brazil, where the largest number of AI companies in the region is concentrated (42% of the total), the number of AI companies has expanded from 120 companies in 2018 to 206 companies in 2020. The expansion of AI adoption and use is at its biggest inflection point, with a projected market of US$70 billion for 2020 and a Fee Annual Growth Rate of 38% for the period 2018-2022. The expansion of the AI market was also evidenced by the sales volume of Latin American entrepreneurs, which Endeavor Intelligence calculates to be around US$4.2 billion, and the amount of investments they received, around US$2.2 billion.