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Tech Roundup May 8, 2020 | Venture investment in Latin America still to feel coronavirus effect

. May 08, 2020
Venture investment in Latin America still to feel coronavirus effect Image: Aniwhite/Shutterstock

You’re reading The Brazilian Report‘s weekly tech roundup, a digest of the most important news on technology and innovation in Brazil. This week’s topics: Venture capital growing in Latin America. The 5G soap opera. And efforts against misinformation. 

Venture capital grows in Latin America

While still far from Silicon Valley numbers, venture capital (VC) investment in Latin American startups has

grown consistently over the past few years. Despite the pandemic, Brazilian startups (which account for half of the region&#8217;s seed-money investment) raised USD 480 million from investors between January and April —&nbsp;the highest for the period ever, marking a 20-percent growth from 2019. Throughout the whole region, VC investment has doubled (in dollars) every year from 2016 to 2019.</p> <ul><li>Interestingly, while the amount of investment in Brazil is growing, the number of deals is <a href="https://distrito.me/startups-brasileiras-recebem-us-144-milhoes-em-abril/?utm_campaign=semanal_07052020_-_base_toda&amp;utm_medium=email&amp;utm_source=RD+Station">declining</a>, according to research company Distrito. In April, 97 percent of the USD 144 million raised went to just three companies: <a href="https://brazilian.report/tech/2020/04/10/social-isolation-measures-to-spur-banks-digital-transformation/">PetLove</a> (pet products), CargoX (logistics), and Sanar (healthcare).</li></ul> <div class="flourish-embed flourish-chart" data-src="visualisation/2305497" data-url="https://flo.uri.sh/visualisation/2305497/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>Why it matters.</strong> Investors seem more inclined to choose safer bets — especially in uncertain times like these. In March, investments were reduced by 85 percent, and most April investments were linked to previous commitments. The fact that CargoX and Pet Love gathered 89 percent of resources indicates that only firms operating in specific sectors are benefiting —&nbsp;not the startup ecosystem as a whole.</p> <p><strong>Trend ahead?</strong> Some experts warn that venture capital could run dry in the coming months, as the coronavirus crisis deepens in Brazil. Moreover, the 45-percent devaluation of the Brazilian Real in 2020 means that it will be increasingly difficult for foreign investors to obtain returns in dollar-denominated investments. Still, it is worth mentioning that, prior to the pandemic, the <a href="https://brazilian.report/tech/2019/08/30/brazil-tech-roundup-digitally-excluded-create-internet/">trend following 2019</a> was a net positive in the region. Here are some of the <a href="https://lavca.org/">notable investments</a>, according to LAVCA, the Latin American Venture Capital Association:</p> <ul><li><strong>KaszeK Ventures</strong> raised USD 600 million across two new funds, including USD 375 million for its fourth flagship fund and USD 225 million for its first opportunities fund.</li><li><strong>Canary</strong> raised USD 75,000 for Fund II. Canary was launched by a collective of founders of Brazilian startups and launched their inaugural fund in 2017.</li><li><strong>SoftBank</strong> received funds from KaszeK Ventures and Valor Capital.</li></ul> <hr class="wp-block-separator"/> <h2>Will Covid-19 postpone Brazil&#8217;s 5G rollout yet again?</h2> <p>Telecommunications company Claro chief executive officer Paulo César Teixeira claimed this week that 5G technology still needs to be &#8220;matured&#8221; before <a href="https://brazilian.report/newsletters/brazil-daily/2020/02/05/industry-numbers-spark-early-2020-pessimism-brazil-orban-5g/">it can be effectively rolled out in Brazil</a>. He has suggested the government should postpone the auction of 5G frequencies —&nbsp;which is scheduled for later in the year — due to the uncertainties caused by the Covid-19 pandemic.&nbsp;</p> <ul><li>The Brazilian currency rout has caused a steep rise in equipment import costs. The coronavirus crisis has also hit the electronics industry hard, as the sector is <a href="https://brazilian.report/newsletters/brazil-daily/2020/02/07/coronavirus-industry-5g-auction-bolsonaro-cabinet/">heavily dependent on imports from China</a>. Earlier this year, thousands of Chinese factories were shut down, and millions of workers stayed home —&nbsp;causing terrible ripple effects across the entire production chain.</li><li>Another point raised by Mr. Teixeira is that 5G-capable mobile phones remain far too expensive for the Brazilian market,&nbsp;making returns on the necessary heavy investments needed in the sector significantly riskier.</li></ul> <p><strong>Why it matters.</strong> As it is, Brazil is already late to the 5G party. As noted by the U.S. Senate Republican Committee, “the country that leads the world in the adoption of 5G technology will have a distinct technological, economic, and national security advantage over other countries.”</p> <p><strong>Too soon to call off.</strong> Early in April, Brazil&#8217;s telecommunications regulator said it will <a href="https://link.estadao.com.br/noticias/empresas,anatel-diz-que-e-prematuro-falar-em-adiamento-de-leilao-do-5g,70003267042">closely monitor</a> the coronavirus developments in Brazil and the world —&nbsp;but added that any talk about postponing the auction was still &#8220;premature.&#8221;&nbsp;</p> <hr class="wp-block-separator"/> <h2>Brazil has a seat in Facebook&#8217;s content oversight &#8220;court&#8221;</h2> <p>Constantly criticized for its <a href="https://www.wired.com/story/facebook-knows-more-about-you-than-cia/">unwillingness to control the spread of misinformation</a> on its network, Facebook Inc. has appointed 20 people from several countries to serve on what will effectively be the social media company&#8217;s &#8220;Supreme Court&#8221; for content moderation. Brazil will be represented by lawyer and data privacy activist Ronaldo Lemos.&nbsp;</p> <p><strong>Profile. </strong>Mr. Lemos is a respected name in Brazil&#8217;s data privacy-policymaking, having helped create the new Brazilian Legal Internet Framework — which regulates how companies must deal with people&#8217;s data, among other things. He teaches law at the State University of Rio de Janeiro and heads a nonprofit focused on technology and policy issues.</p> <p><strong>Other seats.</strong> The Brazilian lawyer will share his duties with other eight law professors, a Nobel Peace Prize laureate from Yemen, journalists, free speech advocates, and a writer from the libertarian Cato Institute. The problem? No expert in the study of disinformation was invited.</p> <p><strong>Why it matters.</strong> Companies like Facebook have hidden for years behind the freedom of speech defense in order to avoid any responsibility for the content shared on their platforms. The company has raised billions of dollars through political ads filled with falsehoods and aimed at confusing voters from all over the world.&nbsp;</p> <ul><li>This initiative could signal a change in Facebook’s culture.</li></ul> <p><strong>But, but, but.</strong> Facebook has announced previous efforts of the kind —&nbsp;which haven’t amounted to much. In 2018, the company hired former CIA officer Yael Eisenstat to help curb election meddling. He didn&#8217;t last too long and left the company <a href="https://www.wired.com/story/facebook-knows-more-about-you-than-cia/">accusing it of not really trying to assess the issue</a>.&nbsp;&nbsp;</p> <hr class="wp-block-separator"/> <h2>Take note</h2> <ul><li><strong>Not stopped.</strong> A <a href="https://www.convergenciadigital.com.br/cgi/cgilua.exe/sys/start.htm?UserActiveTemplate=site&amp;infoid=53573&amp;sid=5">report</a> by consultancy firm IDC Brasil says that, despite the pandemic, Latin America will still have BRL 9 billion in IT opportunities over the next two years. That&#8217;s because industries will be forced into modernization as a cost-cutting strategy.</li><li><strong>Private data 1.</strong> The Supreme Court upheld its decision not to grant Brazil&#8217;s official statistics bureau access to citizens&#8217; personal data held by telecommunications companies. The data would be used to replace in-person interviews when carrying out surveys to measure the impacts of the coronavirus crisis on Brazilians. Now, the agency will have to rely on its own database, with numbers provided by citizens in previous studies. The first results are expected to be published this month —&nbsp;but experts warn that the true effects might be underreported.</li><li><strong>Private data 2.</strong> As our own Lucas Berti <a href="https://brazilian.report/society/2020/05/01/coping-habits-could-cause-health-problems-beyond-pandemic/">showed last week</a>, the consumption of drugs, alcohol, and online porn services has increased worldwide during the pandemic. And a major private data leak hit popular adult live-streaming service CAM4.com. Records leaked amount to 10.88 billion, including personally identifiable information. Almost <a href="https://www.convergenciadigital.com.br/cgi/cgilua.exe/sys/start.htm?UserActiveTemplate=site&amp;infoid=53578&amp;sid=18">6 million Brazilian clients were exposed</a>.&nbsp;</li><li><strong>Private data 3. </strong>A vulnerability in the systems of BB Previdência (the pension unit of state-owned bank Banco do Brasil focused on enterprise pension plans) <a href="https://economia.estadao.com.br/noticias/geral,falha-de-seguranca-em-site-da-bb-previdencia-expoe-dados-de-clientes,70003295592">exposed the data</a> of 153,000 customers from 46 companies stored in the platform. Data such as user’s names, CPF number, date of birth, address, email, phone number, and even the account balances were accessible. Banco do Brasil claimed that the webpage that caused the breach was online for 20 days, but was immediately removed when the bank noticed it. No customer had money withdrawn from their accounts, according to their statement.&nbsp;

 
Gustavo Ribeiro

An award-winning journalist, Gustavo has extensive experience covering Brazilian politics and international affairs. He has been featured across Brazilian and French media outlets and founded The Brazilian Report in 2017. He holds a master’s degree in Political Science and Latin American studies from Panthéon-Sorbonne University in Paris.

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