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Investment in Brazilian startups is booming – Livemint



Digital banking startup Nubank, founded in 2013 just before a sharp economic decline, has attracted investors such as Berkshire Hathaway Inc. and will soon hold an initial public offering in New York. In May, online services marketplace GetNinjas made its debut on Brazil’s stock exchange. Two months earlier, enterprise software company RD Station was purchased for $330 million in one of the country’s largest ever software deals.

Meanwhile, venture-capital funding in Brazil this year through Oct. 12 reached a record $6.4 billion, tripling the amount raised in all of pre-pandemic 2019, according to data firm PitchBook. That exceeded South Korea and Indonesia while surpassing the combined startup investments for Russia, South Africa, Turkey and Nigeria.

The boom is happening despite the challenges of navigating Brazil’s gargantuan bureaucracy and an economy that grew at an average annual rate of 0.8% between 2011 and 2019, underperforming 172 of 195 countries, according to the World Bank.

In recent years, new regulations in Brazil have promoted competition in industries long dominated by a few giants. Entrepreneurs have greater access to financing from a growing group of venture-capital investors. Internet use skyrocketed in the last decade, with Brazilians becoming prolific users of the mobile apps entrepreneurs were developing.

A global surplus of investible funds seeking yield in a superlow interest-rate world is also a boon.

The result: more Brazilians who would otherwise work at multinationals are opening their own businesses—often tech startups. More than 13,000 startups have been founded through October this year, 13 times the number in 2011, according to the Brazilian Association of Startups.

Nubank is emblematic of the new generation of companies. It has amassed 40 million customers, making it one of the world’s largest digital banks by number of clients.

The firm started out by offering a credit card, no fees charged, via a smartphone. It then added products like a savings account, loans, insurance, and investing services, taking on traditional banks, which are disparaged in Brazil for high interest rates and fees.

Until last year, Simone Lauar, 43 years old, who lives in a poor neighborhood in Rio de Janeiro, never had a credit card. “Where I live, we don’t have banks,” said Ms. Lauar, who co-founded a community news site.

A Nubank account permitted her to get a credit card, save money and build a credit history, she said. That allowed her to start paying utility bills digitally and transferring money to family. “I no longer use cash. It’s safer,” she said, referring to Brazil’s high crime rate.

Nubank benefited from Central Bank changes the last five years that created new licenses allowing qualified financial technology startups to provide lending, payments, and investments, creating competition for a banking sector that was dominated by only a few players.

“These are things that even in the U.S. the regulatory constructs are pretty opaque,” said Mike Packer, a partner with Alexandria, Va.-based QED Investors, a Nubank investor. “For fintech and for innovation, Brazil has the most progressive, the most favorable central banking regulations in the world.”

Brazil’s insurance regulator is trying to follow the central bank’s lead in creating more digital competition for that industry. In anticipation, 180° Seguros, a year-old startup looking to make insurance digitally accessible, raised $8 million in May in its first financing round.

Entrepreneurs who have made it are now reinvesting in other startups. Eduardo L’Hotellier, who co-founded GetNinjas in 2011, this year started investing in venture capital funds after his company’s IPO. So, too, is Eric Santos, who co-founded RD Station in 2011 in Florianópolis, helping turn the modest southern Brazilian city into a budding location for startup headquarters.

Strong returns are the draw. The investment of $2.4 million by São Paulo-based venture-capital firm Monashees into GetNinjas a decade ago turned into $23 million at the IPO, said Mr. L’Hotellier. The Astella Investments fund in São Paulo that backed RD Station in 2015 has a net annual rate of return of 50%, according to data provided by Astella co-founder Edson Rigonatti.

None of this was a given when they started. Mr. Rigonatti who co-founded Astella with Laura Constantini, said he struggled getting emails returned from foreign investors.

Today, Monashees, Astella and Argentina-based Kaszek Ventures, which invested in Nubank in 2013, have over a dozen funds combined.

Some investors say the venture capital market in Brazil risks overheating. And Brazil’s economy is always unpredictable. Inflation has been surging. On Oct. 27, the Central Bank hiked its benchmark interest rate to 7.75%, nearly quadruple what it was in February. In recent days, the currency has weakened, and the stock market has been shaken, reflecting anxiety over the populist government’s economic policies.

Kevin Efrusy, a partner with Silicon Valley venture-capital firm Accel and one of the few Americans who has stuck it out in Brazil, acknowledged the risk of wild macro-fluctuations.

“When foreign investors see these swings, they can get bucked off the horse,” said Mr. Efrusy, who has invested in every Kaszek and Monashees fund since 2011. “Brazilians are used to kind of holding on and going through it.”

This story has been published from a wire agency feed without modifications to the text



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Should you use your investments to pay for school or fund a business? – CNBC



Select’s editorial team works independently to review financial products and write articles we think our readers will find useful. We may receive a commission when you click on links for products from our affiliate partners.

Returning to higher education or starting a new business are two lifestyle changes that provide an opportunity to raise your future income potential, but they also require a large upfront investment of money. 

In fact, investors under 55 are likely to pay for their schooling or fund a new business venture by using their investments, a survey by Select and Dynata found. Over half of respondents aged 18 to 54 reported that they invest to fund a business, while over half of 18- to 34-year-olds and nearly half of 35- to 54-year-olds said that they invest to pay for school.

It seems that selling investments to fund these two expenses is quite typical, but is it a smart move? Answering the question really boils down to whether it makes more sense to cash in on your investment gains or borrow the money instead.

“You need to understand what your percentage of interest [would be] on your debt and ask yourself if you can do better in the market,” CFP Bryan Cannon, chief portfolio strategist and CEO at Cannon Advisors, tells Select.

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Should you use your investments to pay for school?

Joe Buhrmann, a CFP and senior financial planning consultant at Fidelity’s eMoney Advisor, suggests that if the student loan interest rate — especially if it’s a federal student loan — is low and attractive, it may make more sense to retain your investments and instead borrow the funds to pay for school. In this case, your rate of return in the market is likely going to be higher than the interest rate you’d pay on your student loans.

Cannon wants investors to keep in mind that the markets over the last 20 years, which experienced two significant -50% bear markets, have averaged gains of 8%+ per year (note that past performance does not guarantee future success). “As a general rule, especially in this low-interest-rate environment, it is not a good idea to cash in investments to pay for school or pay off school debt, especially for younger investors who have a 10-plus year time horizon until they need access to their [investment] funds,” he says.

Let’s use a hypothetical example to see how this could play out. Say you need $10,000 to pay for credits in your last year of grad school, and you are deciding whether to take out a student loan or to tap into your investments to finance this expense.

If you left that $10,000 in the stock market, with the average 8% annual return Cannon identifies, after 10 years that investment would grow to be worth $21,589 (assuming no additional contributions).

Meanwhile, the $10,000 federal student loan you would take out, on a 10-year standard repayment plan with an annual interest rate of 5.28% (the interest rate for federal graduate unsubsidized student loans, at the time this article was written), would end up costing a total of $12,893 after 10 years (assuming you paid the minimum each month).

In this case, taking out a student loan to pay for grad school makes more financial sense than withdrawing the money from the market — you’d rather lose $12,893 than $21,589.

Stuck with a high-interest private student loan and want to pay it off using your investments?

First consider refinancing your student loans through lenders like SoFi or Earnest to score a lower interest rate before turning to your investment earnings. Both offer low rates, no origination fees, flexible repayment terms and economic hardship protection. Once you refinance, the lower rate may mean it’s worth keeping your money in the stock market.

Should you use your investments to fund a business?

The situation, however, may look different when deciding whether or not to use your investments to launch a business.

Taking out an unsecured small business loan without a financial track record could leave you paying a much higher interest rate and it could exceed the return that you might anticipate on your investments, Buhrmann argues. In this case, you could be better off selling some of your investments to jumpstart your new venture. When we say this, we mean investments other than your retirement fund. While you can withdraw money from your 401(k) to start a business, you should first consider the implications that would have on your retirement if your business fails. Plus, you’ll have to pay income taxes and a 10% penalty if you withdraw money from a 401(k) or IRA before age 59½.

And if you’ve already taken out a small business loan and want to pay it off using your investments? “If you took out a loan while inflation was high and the loan had a locked rate, it would make a lot of sense at that point to pay the loan off using your invested capital,” Cannon adds.

The key, he says, is to determine if the annual interest rate you are paying on a loan exceeds the average return on your investments in a year.

Budding business owners take note

Remember that although a new business venture can potentially offer big rewards in the long run, it also comes with a great deal of inherent risk.

“If you sink all of your investments into starting a new business, you will have nothing to fall back on aside from acquiring debt,” Cannon says. “It is important to realize that, in most cases, income is not readily flowing back to a business owner during the first several years.”

If you’re wanting to start your own business, make sure you account for this by having reserves on hand to survive those first few years. “Low capital reserves are often the main reason why new businesses fail,” Cannon adds.

So, if you want to have a cushion in case things don’t go to plan, it can make sense to maintain a healthy emergency fund and not sell all of your investments.

At the end of the day it’s more than just the math

Weighing the potential return on your investments versus the interest rate you’d pay if you took out a loan is an effective way to know if you should use your investments to pay for school or fund a business. However, Buhrmann points out that at the end of the day there are no “right answers” and what works for someone else might not work for you.

“There are mathematical aspects and also behavioral aspects,” he says. “Math and finance might dictate that you should borrow the money to finance the endeavor, but if you’re going to lose sleep or it impacts your health by taking on debt, then by all means, ‘pay cash‘ for the expense and sell some of your investments.”

If you’re someone who is thinking about cashing in some of your investment earnings to fund a lifestyle change, consider speaking with a reputable fiduciary investment advisor who can act as a sounding board and provide guidance.

Catch up on Select’s in-depth coverage of personal financetech and toolswellness and more, and follow us on FacebookInstagram and Twitter to stay up to date.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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Modi's farm reform reversal to deter investment in India's agriculture – Financial Post



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NEW DELHI — India’s repeal of agriculture laws aimed at deregulating produce markets will starve its vast farm sector of much-needed private investment and saddle the government with budget-sapping subsidies for years, economists said.

Late last year, Prime Minister Narendra Modi’s government introduced three laws meant to open up agriculture markets to companies and attract private investment, triggering India’s longest-running protest by farmers who said the reforms would allow corporations to exploit them.


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With an eye on a critical election in populous Uttar Pradesh state early next year, Modi agreed to rescind the laws in November, hoping to smooth relations with the powerful farm lobby which sustains nearly half the country’s 1.3 billion people and accounts for about 15% of the $2.7 trillion economy.

But by shelving the most ambitious overhaul in decades, Modi’s backtracking now seemingly rules out much-needed upgrades of the creaky post-harvest supply chain to cut wastage, spur crop diversification, and boost farmers’ incomes, economists said.

“This is not good for agriculture, this is not good for India,” said Gautam Chikermane, a senior economist and vice president at New Delhi-based Observer Research Foundation.


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“All incentives to shift towards a more efficient, market-linked system (in agriculture) have been smothered.”

The u-turn does allay farmers’ fears of losing the minimum price system for basic crops, which growers say guarantees India’s grain self-sufficiency.

“It appears the government realized that there’s merit in the farmers’ argument that opening up the sector would make them vulnerable to large companies, hammer commodities prices and hit farmers’ income,” said Devinder Sharma, a farm policy expert who has supported the growers’ movement.

But the grueling year-long standoff also means no political party will attempt any similar reforms for at least a quarter-century, Chikermane said.

And, in the absence of private investment, “inefficiencies in the system will continue to deliver wastage and food will continue to rot,” he warned.


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India ranks 101 out of 116 countries on the Global Hunger Index, with malnutrition accounting for 68% of child deaths.

Yet it wastes around 67 million tonnes of food every year, worth about $12.25 billion – nearly five times that of most large economies – according to various studies.

Inadequate cold-chain storage, shortages of refrigerated trucks and insufficient food processing facilities are the main causes of waste.

The farm laws promised to allow private traders, retailers and food processors to buy directly from farmers, bypassing more than 7,000 government-regulated wholesale markets where middlemen’s commissions and market fees add to consumer costs.

Ending the rule that food must flow through the approved markets would have encouraged private participation in the supply chain, giving both Indian and global companies incentives to invest in the sector, traders and economists said.


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“The agriculture laws would have removed the biggest impediment to large-scale purchases of farm goods by big corporations,” said Harish Galipelli, director at ILA Commodities India Pvt Ltd, which trades farm goods. “And that would have encouraged corporations to bring investment to revamp and modernize the whole food supply chain.”

Galipelli’s firm will now have to re-evaluate its plans.

“We have had plans to scale up our business,” said Galipelli. “We would have expanded had the laws stayed.”

Other firms specializing in warehousing, food processing and trading are also expected to review their expansion strategies, he said.


Poor post-harvest handling of produce also causes prices of perishables to yo-yo in India. Only three months ago, farmers dumped tomatoes on the road as prices crashed, but now consumers are paying a steep 100 rupees ($1.34) a kg.


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The laws would have helped the $34 billion food processing sector grow exponentially, according to the Confederation of Indian Industry (CII), an industry group.

Demand for fruits and vegetables would have gone up. And that would have cut surplus rice and wheat output, slicing bulging stocks of the staples worth billions of dollars in state warehouses, economists said.

“Crop diversification would also have helped rein in subsidy spending and narrow the fiscal deficit,” said Sandip Das, a New Delhi-based researcher and farm policy analyst.

Food Corporation of India (FCI), the state crop procurement agency, racked up a record 3.81 trillion rupees ($51.83 billion) in debt by last fiscal year, alarming policymakers and inflating the country’s food subsidy bill to a record 5.25 trillion rupees ($70.16 billion) in the year to March 2021.


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However, while the federal government now has limited scope for change, local authorities “can opt for reforms provided they have the political will to do so,” said Bidisha Ganguly, an economist at CII.

Similarly, venture capital-funded startups have also expressed interest in India’s agriculture sector.

“Agritech, if it is allowed to take root, has the potential to enable a better handshake of farmers and consumers through their technological platforms,” Chikermane said. (1 = 74.83 rupees) (Reporting by Mayank Bhardwaj and Rajendra Jadhav; additional reporting by Aftab Ahmed; editing by Gavin Maguire and Kim Coghill)



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Bukele steps up El Salvador’s bet on sliding bitcoin; buys another 150 coins



El Salvador President Nayib Bukele said the Central American country had acquired an additional 150 bitcoins after the digital currency’s value slumped again, enlarging his bet on the cryptocurrency despite criticism.

Bitcoin, the world’s biggest and best-known cryptocurrency, is down about 30% from the year’s high of $69,000 on Nov. 10. Bukele said last week that El Salvador had acquired 100 additional coins to take advantage of the currency weakening.

Late on Friday, Bukele announced the government had stepped into the market again.

“El Salvador just bought the dip! 150 coins at an average USD price of ~$48,670,” Bukele wrote on Twitter.

Until Nov. 26, El Salvador had 1,220 bitcoins.

In September El Salvador became the world’s first nation to adopt bitcoin as legal tender, a move that generated global media attention but also attracted criticism from the opposition and foreign financial institutions.

The International Monetary Fund (IMF) said on Monday that El Salvador should not use bitcoin as legal tender, considering risks related to the cryptocurrency.


(Reporting by Nelson Renteria; Writing by Drazen Jorgic; Editing by Daniel Wallis)

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