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INVESTING IN LATIN AMERICA? START WITH CHILE 

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INVESTING IN LATIN AMERICA? START WITH CHILE

The 2016 Canning House Lecture – a key event for UK-Latin American trade relations – was delivered by H.E Michelle Bachelet, President of Chile. The event, sponsored by Santander, highlighted the investment opportunities in one of the most economically prosperous nations in Latin America. Santander’s Head of Latin America Desk, Mauricio Munguia, explains.

For international firms thinking about investing in Latin America, there are excellent reasons to start with Chile. With the highest level of GDP per capita in the region, a steady growth rate, a commitment to democratic values and robust political and legal safeguards, the country is undoubtedly an appealing destination for investment.

Of course, Chile’s investment prospects have not gone unnoticed. A recent report by the United Nations Conference on Trade and Development (UNCTAD) places Chile as the world’s eleventh largest recipient of foreign direct investment (FDI) with inflows increasing by 38% from 2014.

Certainly, investors have benefited from Chile’s strong legislation and guarantees – for instance its protection on copyrights – as well as from its network of free trade agreements with 62 countries.

What’s more, investment is further boosted by the enriched line of products, services and expertise offered by a range of international banks, such as Santander, who are well-positioned to facilitate local and international investment in Chile.

Key investment opportunities

Indeed,stable macroeconomic conditions, a host of natural resources and a high position? across global rankings has facilitated growth and expansion across a number of key sectors and industries:

Mining

Although the price of copper has steadily declined over the past few years – like nearly all industrial commodities –copper mining still accounts for 20% of Chile’s GDP and 60% of its exports.With plans to invest over US$70 billion by 2023, in order to improve efficiency and boost productivity, not only will mining will continue to be a huge contributor to economic development,but also offer investment significant opportunities. What’s more, the government has created an attractive policy environment – this includes clear licensing policies and an efficient permitting process.

Energy

Mauricio Munguia

Mauricio Munguia

With an ambitious target to produce 70% of the country’s energy from renewable sources by 2050 – and witha variety of largely untapped natural resources – renewable power plays a prominent role in Chile’s energy profile. Indeed, Chile’s growing attractiveness for renewable energy investment is best exemplified by its ranking of fourth place in EY’s Renewable Energy Country Attractiveness Index (RECAI).

Infrastructure

Meanwhile, the opportunities for city infrastructure investment also look promising. Over the next two years, the Chilean government aims to tender 10 initiatives – worth approximately US$4.8 billion – across a range of public infrastructure sectors. One such project is the design, construction and operation of the Costanera Central Highway (US$1.0 billion) which will be developed and funded through the public-private partnership (PPP) model.

Services

With a fall in poverty rates, a rise in GDP per capita and an expanding middle-class, Chile possesses a rapidly growing services sector. In fact, Santander estimates that both the industrial and service sectors combined contribute to more than 96% of the country’s GDP. With millions of Chileans working their way up the income ladder, the demand for consumer goods and credit and finance is set to grow.

Overcoming barriers to entry

While there is little doubt that Chile presents many opportunities offering strong financial returns, there are always challenges that come with investing overseas. Despite the Chilean economy being considered among the most competitive and transparent in Latin America, investors may nonetheless struggle to navigate a complex bureaucratic and legal environment.

Earlier this year, the Chilean government introduced a new statute entitled “The New Foreign Investment Act” replacing the Decree Law 600 (DL600), the mechanism for the entry of capital into the country. The new framework provides a number of guarantees and rights to investors including access to the foreign exchange market and prohibition of arbitrary discrimination.

As Chile is particularly keen on attracting FDI into both its mining and industrial sectors; the government also offers attractive tax incentives. For example, subject to approval by the Foreign Investment Committee, foreign investors have the option of “locking in” to an invariable tax rate for a maximum period of 20 years.

Given the complexities of Chile’s tax system, it is essential investors have the necessary guidance and expertise and are able to strategically plan ahead. Key to this is finding the right partner. Indeed, banks such as Santander, as well as organisations and governmental departments and bodies, such as Department for International Trade (DIT), are able to offer advice and expertise.

As one of Latin America’s most dynamic economies, Chile presents an attractive, stable and competitive business climate. Indeed, these sentiments were also echoed by President Bachelet in her Canning Lecture address during which she proclaimed Chile “open for business”.

Investing

Wall Street edges down as investors watch bond yields and stimulus

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Wall Street edges down as investors watch bond yields and stimulus 1

By Suzanne Barlyn

NEW YORK (Reuters) – Global equity markets were little changed on Tuesday and Wall Street opened slightly lower as investors paused to gauge whether a bond yield jump had run its course, while they monitored progress on the next U.S. fiscal stimulus.

The subdued opening followed a nearly flat close in Europe and slipping shares in Asia.

Investors are in a wait-and-see mode because of a lull in big market-moving events, said Tim Murray, a T. Rowe Price capital markets strategist.

“The news is trickling at this point,” said Murray, noting that investors are also bracing for possible market surprises related to COVID vaccines and variants.

The Dow Jones Industrial Average fell 91.89 points, or 0.29%, to 31,443.62, the S&P 500 lost 21.45 points, or 0.55%, to 3,880.37 and the Nasdaq Composite dropped 125.55 points, or 0.92%, to 13,463.28.

The pan-European STOXX 600 index rose 0.36% while MSCI’s gauge of stocks across the globe shed 0.30%.

The European Central Bank should expand bond purchases or even increase the quota earmarked for them if needed to keep yields down, ECB board member Fabio Panetta said on Tuesday, after weeks of steady increases in borrowing costs.

Emerging market stocks lost 0.16%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.19% lower, while Japan’s Nikkei lost 0.86%.

Investors will scrutinize speeches from U.S. Federal Reserve officials in coming days for messaging on trends in yields, starting with Lael Brainard at 1 p.m. ET/1800 GMT on Tuesday.

U.S. stocks [.N] rallied on Monday, with the S&P 500 posting its best day in nearly nine months, as bond markets calmed after a month-long selloff.

A Treasuries selloff last week pushed the 10-year Treasury yield to a one-year high of 1.614%. Benchmark 10-year notes last rose 8/32 in price to yield 1.4205%, from 1.446% late on Monday.

The dollar was up for a fourth consecutive day on Tuesday after the spike in bond yields challenged the market consensus for dollar weakness in 2021. But riskier currencies rose as bond markets calmed and stocks recovered.

The dollar index fell 0.158%, with the euro up 0.17% to $1.2068.

Bitcoin fell 0.73% to $48,525.92 after rising nearly 7% on Monday.

Shares in mainland China and Hong Kong fell overnight after a top regulatory official expressed concerns about the risk of bubbles bursting in foreign markets.

“Financial markets are trading at high levels in Europe, the U.S. and other developed countries, which runs counter to the real economy,” Guo Shuqing, head of the China Banking and Insurance Regulatory Commission, told a news conference.

Analysts said the market pause was to be expected after last week’s moves in bonds.

Spot gold added added 0.2% to $1,726.96 an ounce. U.S. gold futures fell 0.12% to $1,720.50 an ounce.

Oil prices largely shrugged off expectations that OPEC would agree to raise oil supplies at a meeting this week.

The global oil market is rebalancing after damage to demand wrought by the COVID-19 pandemic was met with curbs on output by OPEC producers, the group’s president said on Tuesday.

“Crude prices are relatively stable… we see a certain balance between demand and supply,” OPEC President Diamantino Azevedo told Reuters in an interview.

U.S. crude recently rose 0.36% to $60.86 per barrel and Brent was at $63.84, up 0.24% on the day.

(Reporting by Suzanne Barlyn; Editing by Dan Grebler)

 

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French Connection window shopping for offers again as suitor backs out

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French Connection window shopping for offers again as suitor backs out 2

By Pushkala Aripaka and Indranil Sarkar

(Reuters) – Fashion retailer French Connection said on Tuesday that it was seeking new suitors as investment firms Spotlight Brands and Gordon Brothers had pulled out of preliminary talks to buy the struggling UK company.

French Connection said it had formally launched a sale process and had been approached by three other parties and was also still in preliminary talks with previously announced joint suitor Go Global Retail and HMJ International.

London-listed French Connection was a force in the British fashion market in the 1990s and was once known for its provocative “FCUK” brand of clothing and accessories, but the company has not been profitable in nearly a decade.

Just before the COVID-19 pandemic began last year, it had abandoned plans to sell itself after a more than year-long review of its business. However, as the crisis deepened, sales of already struggling British retailers, including French Connection, Laura Ashley, Oasis and Arcadia, were hard hit.

Last month French Connection had said its talks with Spotlight-Gordan and Go Global-HMJ were at a very early stage.

On Tuesday it said Spotlight and Gordon Brothers did not intend to make an offer.

Go Global-HMJ has until March 5 to decide whether to make a bid.

Shares of French Connection have also had a roller coaster ride. They nearly tripled in value since the start of this year to Monday’s closing price of 26.8 pence, erasing a 72% fall in 2020. At Monday’s closing price, French Connection is valued at roughly 26 million pounds ($36 million).

In October, the company reported that its losses more than tripled in the six months through July 31 from a year earlier, as the retailer, whose brands include namesake French Connection, Great Plains and YMC, also struggled to differentiate itself from rivals such as Inditex’s Zara.

WH Ireland is acting as the sole financial adviser and broker on the sale for French Connection, which was founded in 1972 by Chief Executive and top shareholder Stephen Marks.

($1 = 0.7181 pounds)

(Reporting by Pushkala Aripaka, Indranil Sarkar and Jasmine I S in Bengaluru; Editing by Krishna Chandra Eluri and Susan Fenton)

 

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Why the future of VC investment will be more about ‘venture building’ than equity share

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Why the future of VC investment will be more about ‘venture building’ than equity share 3

By Shawn Tan, CEO of Skymind

We all know that historically the VC industry has been based on the belief that if one portfolio company goes bust, it doesn’t really matter. The bigger bet is that another portfolio company’s breakout success will override the losses of the rest. It isn’t surprising then that there are plenty of VC horror stories, which are not difficult to find.

Whether it’s the M&A bait and switch or sacrificing future profitability, the old ways of doing VC can be famously detrimental to entrepreneurs. For example, a founder who sells their startup for $1 billion could end up with less money in their account than someone who sold for $100 million.

It can take multiple funding rounds to reach the billion-dollar valuation, with each round chipping away at the founder’s stake in the company. Ultimately founders can end up with a tinier slice of a larger pie when the truth is that the bigger portion of the smaller pie could have been much more valuable.

Yet over the last decade, the VC market has exploded: Crunchbase shows more than $1.5 trillion invested into venture capital deals globally over the past decade. VC isn’t going anywhere, but I believe it is evolving, and in the future, VC investment will place more emphasis on venture building rather than equity share.

Forward-thinking VCs will seek out innovations that are good for society and not just their business value, mirroring a rise in environmental, social, and governance (ESG) focused investing. Last year, 38% of financial professionals were using or recommending ESG funds, with nearly a third of financial professionals planning to expand their use or recommendation of ESG funds over the coming year.

This symbolises a paradigm shift into a more socially responsible form of capitalism, where there is an emphasis on serving “stakeholders” like customers, employees and communities as opposed to only shareholders. Beyond genuine environmental concern, ESG investing can also be seen as a risk-management strategy. There is more long-term viability for companies that are run sustainably, from both consumer and regulatory standpoints.

As a result, VCs will be looking for disruptive and tenacious founders. They will actively seek out entrepreneurs set on creating technology with the most significant social impact, who have plans to get their ideas to market as quickly as possible. The future of VC investment will be about creating true partnerships with the companies they support, which is the heart of venture building.

Venture capital has historically been about placing a certain amount of money in a company and hoping for a certain return. On the other hand, venture building requires much more from the investor: time, energy, services and expertise, alongside capital. Venture building is about selecting business ideas, creating teams, sourcing funds, supporting the ventures and supplying shared services.

It is about working closely with the entrepreneurs to supply them with an entire suite of service support, from financial backing to corporate client introductions and talent acquisition. The quality and dynamics of networks play a unique role in the venture building model. The model relies on sourcing a specific and unique blend of expertise to turbocharge portfolio companies faster than competitors.

In an increasingly globalised world with large-scale challenges never faced before, we firmly believe that venture building with ESG credentials will become the gold standard for investing in the future. We are excited to be taking this approach at Skymind, and we hope that it won’t be long before others follow our lead.

About Skymind

Skymind is the world’s leading open-source enterprise deep-learning software company and the first dedicated AI ecosystem builder, enabling companies and organisations to launch their AI applications and bring their business cases to life.  We provide clients with supported access to Eclipse Deeplearning4j and other open source tools as well as global capital funding and talent development.  Skymind  is headquartered in London, UK, with offices across Asia and Europe. For more information visit the website. https://skymind.global/

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