Entrepreneurship in Peru and Ecuador: ecosystems that have yet to turn startups into unicorns

Latin America

Latin America has become the cradle of several startups that in the last year – many of them driven by the pandemic – have managed to take that long-awaited leap and become unicorns. This is the case of Ualá, Aleph, Mural or Tienda Nube, from Argentina; Kavak and Clip, from Mexico or Notco, from Chile, which reached a valuation of over US $ 1 billion. And the list of more startups that would be the next unicorns is long. This is demonstrated by an investigation by the venture capital firm ALLVP, which accounts for the club of soonicorn, or Latin American startups with the greatest potential to become unicorns. The report considers companies founded after 2012 with a valuation greater than US $ 100 million or that in their last round of investment have raised more than US $ 20 million of capital. Countries like Brazil, Mexico, Colombia or Chile stand out for having a list of several candidates. However, the story in Ecuador and Peru is different. In the first country they only have one startup aimed at the world of unicorns (the fintech Kushki), while Peru has two options: the edtech Crehana and the Favo food marketplace. And although Argentina follows these Andean countries with four startups, the land of tango is already home to several unicorns, such as the emblematic Mercado Libre and OLX. 

In the case of Ecuador and Peru, Both have ecosystems with similar characteristics that have delayed the generation of unicorn pasta startups. “Ecuador’s entrepreneurial ecosystem is in an initial stage and we are missing some factors to have unicorns or sonicorn companies, in this case. On the one hand, we don’t have as many entrepreneur support organizations such as incubators, climbers, mentoring programs and support programs for the development of knowledge and skills of entrepreneurs, which are so important for their startups to be successful ”, says Justin Schwartz, managing partner of the investment fund Impaqto Capital. On the other hand, the executive says that the venture capital industry is very small. “We only have five venture capital funds of different types, they are all small. Some invest in Ecuador and others in the region. There is definitely an access to capital gap for early-stage startups. Another point is that Ecuador is a small market, a startup cannot be successful or reach the level of a unicorn only with a focus on this country ”, he says. For Mauricio Andújar, CEO and co-founder of the digital transformation agency Liquid, the Peruvian entrepreneurship and innovation ecosystem is immature and still lacks time to reach the level of others, such as the Chilean or Colombian. “In the Chilean ecosystem, Startup Chile and the Production Development Corporation (Corfo) are two government vehicles that have made this dynamic. In Peru, in the last two years – with a pandemic and a political and economic crisis in between – government support has slowed. Programs like ProInnóvate have frozen aid and there are no new generations of nascent ventures and that is worrying. 

There are not so many new ventures coming out and my hypothesis is that it happens because there are not so many incentives for that to happen ”, he says. Additionally, Karen Montjoy, Entrepreneurship and Innovation coordinator of the Innova ESAN incubator, says that tax benefits are also necessary for more investors to invest in the ecosystem, make alliances with incubators and international events that promote entrepreneurship.


SOURCE: America Economy

The Air Freight Boom: Latin America’s Missed Opportunity?

Latin America

The solution is in the air. This thesis belongs to the shipping giant AP Moller-Maersk. Yes, the world’s largest cargo ship company is looking in the air for a way out of bottlenecks in the face of the container shortage that has kept seaports congested since the beginning of the year. The idea seems paradoxical, but it has worked. Between the months of April and May, when protests broke out in Colombia that caused blockades and the closure of ports such as Buenaventura, the distribution platform for youth lifestyle brands, Accur8 Distribution, was unable to move its cargo for the Vans brand from Asia, where it was dammed. 

Their inventories in the South American country began to run low and the time to fulfill their commitments was running out. Faced with this challenge, the shipping company responded by using an alternative mode of transport in which it combines maritime with air and Accur8 was able to deliver its merchandise on time. “What we are doing is providing a solution to customers,” explains Juan José Ballesteros, Maersk’s product management director for the West Coast of South America. Maersk’s case is not the only one. The high demand for consumer goods and manufacturers eager for parts has large markets such as North America, Asia and Europe taking over the cargo flights that come to the rescue –literally– of the merchandise that has been stagnant in ports due to the crisis of port logistics. So much so that according to the International Air Transport Association (IATA), cargo planes flew more crowded this summer than at any time since it began keeping records in 1990. But the overall scenario is more complex because not all cargo can be transported by plane and because there are cargo whose costs they are relatively low and do not support the high prices of air freight, which, like ocean freight, is through the roof due to high demand. Within this complicated scenario, Latin America has lagged behind, and not so much because its needs are different, but because its capabilities are limited and have not allowed it to respond to the feverish demand generated by the e-commerce boom and congestion in the port terminals, according to experts. 

“Latin America is not being able to capture all the capacity. It is not following the growth of demand as Europe and North America are doing, ”says Ballesteros. According to the IATA August report, air cargo transport (measured in ton-kilometers) continued to grow strongly globally with 7.7% in the eighth month of 2021, compared to the same period in 2019, while Latin America maintains this factor in the red with -13.2% (a decrease compared to the previous month in which the drop was 9.8% and an improvement compared to June, when it registered -19.9%), with a reduced capacity in -27.1%. “Today the freight industry is more or less double what it was in 2019, but the amount of tons transported has not increased significantly. That shows you that there is a very large imbalance between the demand that has grown a lot and the supply that has been blocked in its capacity ”, says Andrés Bianchi, CEO of LATAM Cargo. A turbulent outlook even for multinationals like DHL, the largest global parcel company. “Adapting to this new scenario has been a challenge that we continue to face,” acknowledges Alberto Oltra, CEO of DHL Global Forwarding in South America. According to the company executive, the fact that the supply of space is below the level of 2019 while global demand has already recovered and exceeded what was achieved in that same year, has changed the dynamics of the market. “The competition has been tough as spaces are very tight,” he says. In the region, This imbalance is mainly due to the fact that most air cargo is transported in double-aisle passenger planes, and when restrictions were imposed due to the pandemic, airlines left their planes on the ground, affecting the available space. “At first it was not felt so much because the big economies were stopped, but when consumption explodes at a global level and spaces are needed, the slow recovery of passenger flights generated a cut in capacity and therefore an increase in prices”, he explains Nicolás Portenza, CEO of Eternity Group México, a Chinese cargo transportation company. 

With the airline industry recovering very slowly and consumption accelerating due to e-commerce, the region has been overwhelmed. Electronic commerce “is being an important piece in the demand and in the lack of capacity,” says Portenza. And Carlos Ozores, vice president of the consulting firm ICF and director of Aviation for the Americas, endorses it. “The growth of e-commerce is tending to be much more dependent on air due to the promise that the seller has to deliver you in a short time,” he says. So much so, that during the pandemic e-commerce has reflected for the Colombian airline Avianca a growth of 12 times that transported in 2019. “It has been for us one of the products with the greatest increase in exports to Latin America and intra-Latin America” , acknowledges Gabriel Oliva, CEO of Avianca Cargo. A factor that can make the difficult Latin American scenario even more complex considering that the World Trade Organization (WTO) foresees that consumption will accelerate towards the end of the year and world trade will grow 9.5% in 2021. Given this, Alejandro Méndez, Vice President of Aeroméxico Cargo, issues a warning: “The capacity that we as airlines can provide to the monsters of e-commerce is very limited on some routes.” The lag of Latin America vs. the world These are challenging times for international logistics due to soaring costs and slowing down operations. Maersk’s product management director explains that the problem itself encompasses all actors in the chain. “There are fewer airline options, there are congestion in the hubs because the airports are operating with fewer personnel and, therefore, there are fewer flights and the cargo does not connect on time. There is a shortage of personnel, there is a shortage of carriers and that requires planning to be even more critical ”, describes Portenza. And in Latin America, where the restrictions to contain the COVID-19 pandemic have been more durable than in other regions, this reality has had a greater impact. “There has been a reduction in the number of people available for transport and warehouse logistics work and that is why capacity has been lost. The cargo cannot be prepared on time ”, acknowledges the head of LATAM Cargo.

For Eliseo Llamazares, leading partner in Aviation and Tourism for KPMG in Latin America, the equation that explains why Latin America has not grown so much in demand is simple: The restrictive measures have slowed down the recovery of the economy and the cargo business is fueled by economic growth. Furthermore, the fact that the restrictions have been so different within the countries of the region produced an imbalance between supply and demand. But it’s not the only thing that makes the stage difficult. According to Llamazares, the performance of air freight in Latin America has always been worse than in the rest of the world because for years airlines greatly reduced the volume of cargo planes. “Many of the big companies that had pure freighters, they switched to the transport of merchandise in the warehouse of commercial aircraft, which is much more efficient since the cost can be shared between passengers and cargo,” he says. Consequently, In Latin America, this capacity was substantially reduced, so much so that when demand skyrocketed in the midst of the pandemic, airlines had no choice but to convert some of their aircraft. With limited capacity, the logistical challenge for Latin America seemed large, if it were not for the fact that it is a region with a small air import, which moves mainly perishable products. 

“The cargo dynamics in South America is different from other regions due to the mix of commodities that move. Furthermore, while regions such as Asia and the United States transport finished products by air, what we export the most (by air freight) are perishable products, ”says Bianchi. Only Brazil and Mexico move large volumes by air, and neither country completely stopped its air operations during the pandemic. In fact, the performance of Mexico stands out as the only one with a performance similar to that of the large markets. According to the IATA report, the country experiences the same growth trend in cargo transport as other regions, with a 12% increase in the first half of this year. The association, in fact, estimates that at least 30% of the total income of Mexican airlines will come from freight transport, something that has not been seen for a decade. Nicolás Portenza, who directs the Mexico – Asia logistics corridor for Eternity Group, reports on this growth and how airplanes are transporting merchandise that would normally go by sea. “We have seen very high demand for a product from our importers in Mexico to meet the market, and despite the high cost of the air, it was decided to fly,” he says. Although, due to confidentiality, he did not reveal details of the clients who have chosen this route, he did comment that many industries are having record sales of household appliances, white goods, and that retail has had a significant consumer boom. “When companies need some components to manufacture, meet quotas, they have changed their operations to air,” he reiterates. In the case of Aeroméxico, the increase has been very marked by the transfer of auto parts. In fact, Méndez affirms that many of the “express requirements” that they have had to attend to in recent months correspond to this sector and with greater dynamics on routes that cover the Asian continent. “We are reaching destinations that we never thought we were touching,” acknowledges the VP of Aeroméxico Cargo. Some of the routes that they cover and that are not part of their passenger offer are the Chinese cities Shenzhen, Hong Kong and Wuhan, as well as the Russian capital, Moscow. This transfer of cargo from one modality to another has also been seen in DHL and, according to Oltra, it is a phenomenon that clearly responds to an urgency to replenish stock. “This represents a break for the sector since in 98% of the cases the companies try to minimize the logistical cost giving priority to the maritime transport”, says the CEO for South America of the German company. A sample of how the dynamics in general have changed. “Today the market is more spot and shipment by shipment […] and the possibility of hiring charters for its own operation has become a solution,” he adds. The Maesrk experience is no different. “We are ensuring air capacity with charter flights for flows from Asia to Central and South America,” says Juan José Ballesteros. According to the executive of the shipping giant, in his case it is a proactive rather than reactive strategy. 

“We do this transfer in a coordinated way with the client and for that we ask for great planning,” he assures. The “mutation” of airlines to respond to demand Airlines in Latin America have done their best to adapt and respond to high demand. Many of them responded by transforming some of their passenger planes into cargo planes. Even so, capacity remained limited because, first, that adaptation cannot be done with all models, and second, the modifications fail to decompress much of the load. “If a commercial airline takes a Boeing 787 airplane and makes modifications to it to turn it into a cargo plane, it would be able to fly between 30 and 40 tons. That is half of what a Jumbo 747 can carry ”, says the CEO of Eternity México. Now, from a business point of view, it has been a great opportunity for airlines because it has allowed them to alleviate the impact that the pandemic had on the airline industry. And the ones that have known how to take advantage of it best –according to the consultant Carlos Ozores– are those that carry the cargo business in their DNA, such as LATAM and Avianca. The numbers of the Colombian holding show the good results. During the pandemic period, Avianca Cargo increased the use of freighters by 19% and cargo flights by 13%, compared to 2019, with an increase in frequencies in the markets of the Southern Cone. These are the highest levels of cargo fleet utilization for the airline, according to the company’s chief. “We quickly adapt to new market conditions, modifying our network according to demand, increasing frequencies to Europe up to seven flights per week and launching a new multimodal maritime and air service to improve our connectivity”, explains Oliva. Between January and August of this year, Avianca saw its capacity decrease by 30% compared to 2019, mainly due to the reduction in passenger flights, but the load factor increased 8 points to 68.4% and revenue per ton-kilometers available (ATK) increased 70%. “The high demand has been constant in all markets, however, the most representative have been concentrated in flower routes, specifically from Colombia and Ecuador to the United States, with a growth of 21%”, adds the head of the cargo unit of Avianca. In the case of LATAM Cargo, at least half of its cargo capacity came from passenger planes, so the restrictions caused it to lose a good part of it. Given this scenario, Andrés Bianchi details, they focused on three points in order to meet the demand: increase the utilization of the cargo fleet, maintain as many passenger flights as possible, and fly cargo-only passenger aircraft. These measures have allowed it to keep the business afloat, which in August of this year registered an occupancy of 61.9%, which represents an increase of 7.4 percentage points in relation to 2019.

“We have seen in our cargo planes that It is typical of the maritime sector and that it moves by air only in urgency, such as certain parts of cars, tires… we have even carried a brick charter ”, says Bianchi to exemplify how the business is moving. Amid this boom, LATAM Group announced a plan under which it expects to gradually add 10 Boeing 767-300s over the next three years, to total a fleet of 21 cargo aircraft by the end of 2023. “The cargo business has weathered the crisis very well, so much so that LATAM will double its fleet within two years. This is because they recognize the opportunity that exists in this business and that a slower recovery of long-range international flights is coming ”, comments the ICF vice president. Although Bianchi affirms that the plan was devised before the pandemic, he acknowledges that the fact that the business is going through a very auspicious moment, “makes it important to execute it well and quickly.” Unlike Avianca and LATAM, Aeroméxico does not have the cargo business in its DNA, so its effort was focused more on adapting this model. “We are a cargo division of a passenger airline, therefore our planes fly depending on the demand for passengers. But at the beginning of the pandemic, it was not flying and there was a need to transport cargo. That led us to start with a model that previously did not exist in the [Aeroméxico] group, ”highlights Alejandro Méndez. Thus, in March 2020 Aeroméxico carried out the first cargo charter flight in its history. At the time of the interview for this report, Méndez reported flight number 398 and assured that it would reach 400 charters before the end of the week. “We do not adapt airplanes, what we did was load the cargo in the passenger cabin and fly,” says the executive. The historical gap in maritime and air prices is reduced Historically, maritime transport has been more competitive than air. And it continues to be the case, the gap between the two modes has not been reversed, but it has narrowed. The increase in maritime freight prices has been so exponential since the beginning of the pandemic – in the order of 800%, according to Portenza of the Eternity Group – that it has cut the difference with air, which has seen its prices increase between 100% and 120% depending on the route. “Now the difference, which was 12: 1, has gone to 6: 1,” says Gabriel Oliva. 

Hence, IATA claims that air freight is becoming more competitive. The increase in rates is a simple effect of the law of supply and demand. But more is also being paid to move planes with just half their capacity, explains the CEO of LATAM Cargo. “As a result of the pandemic, commercial flights are canceled and there is not enough cargo fleet to respond, therefore, the only option has been to fly passenger planes without passengers… but since I can’t carry cargo on the seats, you end up flying only with the hold. So you are paying the cost of moving the entire plane, using only half the capacity ”. In the case of LATAM, until August 2021 the cargo rate had risen almost 60% compared to 2019. Very similar to the 50% on average that they have seen reflected in Aeromexico. According to Juan José Ballesteros, at the peak of the pandemic the air freight rate went from US $ 4 to US $ 20 per kilo, and is currently between US $ 7 and US $ 12. It is not very different from what it reports. Nicolás Portenza, from Eternity. “At the air level, the rates for the Asia-Mexico route in the pre-Covid season ranged from US $ 4 in low season and from US $ 6 to US $ 7.5 per kilo in high season. Right now we are flying cargo with rates between US $ 12 and US $ 14 per kilo, ”he says. And can the market pay the high costs? Yes, because the operation covers it. “It is still a business for importers to fly and comply, because eventually the final consumer pays for it. There is an inflationary impact on the destination markets because they are costs with a significant increase compared to what happened years ago ”, explains Portenza. Alberto Oltra, from DHL, acknowledges that this impact on the final cost of the product is inevitable when prices have doubled, but also warns that if rates continue so high, nearshoring may occur (that a company decides to transfer its business processes to a geographically close foreign country). “This situation would have an effect on local economies, where the production of goods intensifies, as is already happening with some auto assembly plants in Mexico, which have returned to produce there, ”he highlights. For better or for worse this condition will not clear up anytime soon. Analyst Carlos Ozores indicates that airlines in the region will place emphasis during their recovery on single-aisle aircraft, which are smaller and have less cargo capacity. “(Therefore) there will continue to be a gap in space available for cargo planes,” he says. The truth is that this rise in airfares has represented a great relief for airlines. In the last year and a half, the cargo business went from being between 5% and 10% of total revenue to a much more relevant part (between 30% and 40%), making it a valuable source of cash and a way to offset part of the losses in the airline industry, which IATA estimates will exceed US $ 48 billion this year. “The cargo business has worked as a countercyclical compensation for what has happened with passenger flights,” acknowledges Bianchi. Before the pandemic, cargo represented approximately 10% of LATAM Group’s revenues, and in the last semester they accounted for 40%. 

In the case of Avianca Cargo, so far in 2021 it has had an increase in its freight income of 19%, and these represent 32% of the total income of the holding company. For Aeroméxico, the reality is not very different, although its levels are below those of LATAM and Avianca. “In 2019, cargo represented 6% of the Group’s total income. In 2020 it was 16% and today it is in the order of 13% ”, explains Méndez. That is why the IATA forecasts on this factor are quite optimistic. According to the agency, revenues from the global aviation sector from the transport of goods have doubled to 30% of pre-pandemic levels and are estimated to rise to a record $ 175 billion in 2021. A resilient and necessary business for the region One of the realities that have emerged in the midst of the crisis in the airline industry and the boom in demand for cargo flights, is that Latin America is in debt in this business, so it is imperative to increase its limited capacity in these times of high consumption driven by e-commerce, a phenomenon that will not stop until at least 2024, according to data from the Statista Digital Market Outlook. In fact, for Eliseo Llamazares the great hopes for the region are precisely in e-commerce and he hopes that it will become a significant source of freight transport. “Just as Amazon is an important player in the United States, in Latin America we have Mercado Libre taking its first steps in the air cargo market and it can become a significant player,” says the KPMG analyst. In any case, the important thing now is that the industry not only begins to create strategies to sustain itself in this situation, but also projects how to benefit its distribution chain in an increasingly demanding world, considers Oltra. DHL’s leader for South America believes that the implementation of technology and continuous improvements such as those they have been implementing to track shipments at each stage and online quotes is essential for this. In other words, companies must adapt and prepare for the times to come. Above all, considering that it is a business “resistant to shock like that of the pandemic”, assesses the ICF consultant. For this reason, in recent months the demand for aircraft conversion has increased, which shows the interest of airlines in this market. “What LATAM is doing only indicates that it is preparing for a ‘V’ growth of the economy,” says Llamazares, who insists that airlines should take advantage of economic growth and develop the cargo business. And in Aeroméxico they are considering it. Although Alejandro Méndez could not reveal details of what they plan to do as an airline group, he acknowledges that the new scenario has led them to rethink the need to maintain this model. “We are evaluating it very seriously. The niche is there, it is not an occasional demand, it will continue there. 

This is a requirement that has to be met and we have to be there ”, says the vice president of Aeroméxico Cargo. What he did advance was that they are betting heavily on the transport of pharmaceutical products, a niche in which they want to be leaders; and for this they are making the necessary operational and infrastructure adjustments. But it is not a job only for the airlines. The other reality is that the region lacks an adequate airport and logistics infrastructure that allows it to generate greater cargo capacity. In this regard, Méndez states that the Mexico City International Airport -the main one in the country- is a clear example of these challenges. “The space issue is a serious matter, we have structural limitations that become bottlenecks and prevent us from taking advantage of opportunities,” he says. And he is not the only one with this critical view. For Andrés Bianchi, it is necessary “to have better airports, greater warehouse capacity and authorities more open to listening to proposals for improving productivity that would make the business work better.” For now, this dynamic of high demand will continue for at least one more year, according to experts’ estimates, but the region will remain limited with a slow growth rate. “In Latin America we will continue to see a lower expansion than other markets,” says Llamazares. The cargo business in Latin America will grow, but still not enough to close the gap with other regions. Globally, IATA estimates that air cargo demand will close this year at 7.9% above 2019 levels and that in 2022 it will grow by 13.2%. And if last summer was a record period for the transport of air cargo, the Christmas season is coming as the biggest challenge. The International Air Cargo Association (TIACA) has warned: “We face unprecedented challenges in meeting the demand for air cargo services forecast for the fourth quarter of the year.” Given this, urged governments to streamline ad hoc freight permits and initiate planning. “Resources and capacity will be a problem, also handling, the space of the facilities, delivery and drivers,” warns Steven Polmans, president of the organization, through a statement released last September. At Maersk they are aware of this challenge and have been preparing for it. “We believe that this campaign (the last quarter) may come 30% stronger than last year,” says Ballesteros. In general, he adds, it is a very demanding period on the west coast of South America because fruit shipments coincide with the Christmas season. “In Chile, the cherries campaign is going to be critical towards the end of the year. This is demanding not only maritime capacity, but also air capacity ”, he comments. To face this challenge, the airlines will not be able to count on the recovery of air traffic that will allow them to absorb this peak in demand, so we are on the verge of a strong rise in demand on a capacity that is already quite overextended. 

SOURCE: America Economy

The outpost of the lithium Triangle: Argentina, Bolivia and Chile monopolize global investments

Latin America

Jujuy, Salta and Catamarca. Three provinces located in the northwest of Argentina that have become an important enclave for the extraction and production of lithium. Such is the wealth of this metal in this area, that at the beginning of October the governors of these provinces signed an interprovincial treaty for the creation of the Lithium Mining Region. “In this way we advance so that the three provinces offer the same opportunities for those who want to invest, with clear rules, legal certainty and predictability,” said the governor of Salta, Gustavo Sáenz, after announcing the creation of this region. The Salta authority knows that with electromobility stepping on the accelerator in the world, time is money (in this case white). Thus, in recent months this province has managed to attract large investments, as is the case of the world’s most important lithium company, the Chinese Ganfeng Lithium, which announced an investment of US $ 580 million to carry out the Mariana project in the Salar del Llullaillaco, southwest of the Los Andes department, in Salta. In the neighboring province of Catamarca, another Chinese giant, this time Zijin Mining, one of the largest gold and copper producers in the Asian country, recently announced an agreement to acquire all of Canada’s Neo Lithium, focused on the exploitation of its mine. of lithium from Tres Quebradas. The amount of the transaction: US $ 740 million To date, Argentina has a portfolio of 20 lithium projects and their progress is diverse. In addition, Investors come not only from the mining sector, but also from the automotive and technology industries. This is the case of Toyota, which confirmed an investment of US $ 400 million to increase the production of lithium carbonate for the manufacture of batteries through the company Sales de Jujuy – where Toyota Tsusho owns 25% in association with the mining company Orocobre ( 66.5%) and the Jujuy state company Jemse (8.5%) -. BMW, for its part, signed a contract in March 2021 with the US mining company Livent for US $ 334 million for the purchase of lithium from the project that the company has in the Salar del Hombre Muerto located in Catamarca. With this agreement, Argentina would become the German automaker’s second lithium supplier from 2022, behind Australia. Thus, Argentina, which is part of the famous Lithium Triangle, A region that concentrates more than 50% of this resource in the world, also made up of Chile and Bolivia, is emerging as one of the few countries that is able to respond to the growing demand for this input for the production of ion batteries. Rechargeable lithium, a key part for the operation of electric vehicles. Chile and Bolivia also meet this profile, although in the Altiplano country, despite having the largest amount of reserves in the world (21 million tons), it still cannot extract it. 

THE DREAM OF ELECTROMOBILITY COME TRUE Before the pandemic, electromobility sounded like a dream far from being realized. Changing a gasoline car for one that needs electricity to function in a world that still does not have the recharging infrastructure to guarantee its operation and when its price that can be up to 100% more expensive than a conventional car, were not the best incentives to opt for an electric car. Today the panorama is different. The pandemic quarantine gave a break to the world automobile fleet and the reduction in the use of fossil fuels brought a considerable improvement in air quality, causing many countries to take seriously their electromobility plans that would be reflected in a greater demand for electric cars together with other efforts to slow the advance of climate change. According to a report prepared by the Ultima Media consultancy for the Swiss group ABB, the global battery manufacturing capacity expected by 2030 will not be sufficient to meet the demand from the automotive industry. This is due to the fact that electric cars will exceed those of combustion in sales in 2036, the year in which 80 battery factories will be in operation around the world. “There is concrete data and evidence that allows us to visualize that there is a strong accelerated trend of electromobility cannibalism on internal combustion in the transportation industry. Therefore, being this one of the largest industries in the world, this technological mutation will imply unthinkable changes in our lives and civilization. For all this, I consider the enthusiasm on the subject justified and even timid, ”says Jaime Alée, president of ESK Consulting. For Chris Berry, founder and president of the consultancy House Mountain Partners, although interest in electric mobility is at an all-time high and sales of electric vehicles continue to increase, this high demand for this type of car has had an effect on production systems of the automotive industry. “Recent data with clogged supply chains and a lack of semiconductor chips for all cars shows that this is starting to affect automotive sales in general and may also affect EV sales in the future until supply chains can begin to operate efficiently again. This could take more than a year to resolve, ”he says. And although in Latin America the lithium supply chain has not yet reached the stage of production of batteries and much less of vehicles, all the experts consulted for this report agree that this great optimism about the high demand for electric vehicles has good fundamentals and now is the time for the countries of the Lithium Triangle to take advantage of this boom and become strategic suppliers especially for the future automotive industry. Thus, the security of lithium supply has become a priority for technology companies in the United States and Asia. Thus, In recent months, strategic alliances and joint ventures have been established between technology companies and exploration companies (such as those mentioned above in Argentina) to guarantee a reliable and diversified supply of lithium for battery suppliers and vehicle manufacturers. For Patricia Vásquez, Global Fellow at The Wilson Center, at this juncture there is no time to lose. 

“The optimism for the Lithium Triangle and other countries like Peru, Mexico and Brazil is well founded, especially for countries like Argentina and Chile that are very advanced. Countries like the United States and Europe have made important commitments to electromobility and in the next 10 or 15 years Latin America is very well positioned to respond to part of that demand. Although it is true that lithium is abundant and many countries are looking for it even at the bottom of the sea, the technology must be developed to extract it, make the investments and that takes a long time. That’s why the opportunity for the Lithium Triangle is now, before the competition starts, ”he says. For now, according to data from the United States Geological Survey (USGS, its acronym in English), identified lithium resources have increased substantially worldwide and total around 86 million tons. Only the Lithium Triangle concentrates 47 million tons, with Bolivia being the country with the largest quantity: 21 million tons. “The Lithium Triangle will always be attractive from a cost perspective with some of the largest and lowest cost lithium resources on the planet. The recent lithium deals in Argentina with the Chinese company CATL buying Millennial Lithium and Zijin Mining buying NeoLithium are two examples of the attractiveness of Argentine lithium assets. In addition, Sigma Lithium is building the first phase of its hard rock lithium mine in Brazil with first production planned for the end of 2022. They have current purchase agreements with Mitsui and LG Energy Solution, which are world-class partners. South America will remain an important part of the lithium supply chain for many years to come, ”says Chris Berry. In addition, countries should take advantage of good lithium prices to attract more investment. Especially when the price of lithium carbonate is at its best. Benchmark Mineral Intelligence, The global battery supply chain investigation and price information agency reported that last September lithium carbonate increased in China (the main consumer of lithium) 170% so far this year, to 142,000 yuan a ton (US $ 22,000), its highest level since April 2018. Meanwhile, in other markets, the price of lithium rose from US $ 17,500 per ton at the beginning of September and reached US $ 19,000 in the first half of that month.

A year ago, when the COVID-19 pandemic halted lithium extraction and crippled mining activity in general, the metal’s value fell below $ 7,600 per tonne. “Lithium will stay at that value in the long term or it will go down. Possibly there is some adjustment volatility between supply and demand, but the trend is that there will be no shortage of supply and prices will adjust ”, says Jaime Alée. FROM THE TRIANGLE TO THE SQUARE Although many countries around the world have launched into the search for lithium, some Latin American nations have already made some progress, although still far behind the Lithium Triangle. This is the case of Peru, where the Canadian junior Plateau Energy found in 2017 a lithium deposit in the Andean region of Puno called the Falchani lithium project. This year, another Canadian, American Lithium, completed the acquisition of its compatriot, the parent company of Macusani Yellowcake, a mining company that operates and manages Falchani. “The new owner, American Lithium, is giving a lot of movement to the project. You are going to resume exploration so that once the resources are defined, that is good news. With this, the quality of proven reserves will be verified and quantified. The company also operates in Nevada, United States, whereas the previous owner was a junior mining company ”, says Rómulo Mucho, former president of the Peruvian Institute of Mining Engineers (IIMP). Regarding the amount of resources in Falchani, the Ministry of Energy and Mines (Minem) of Peru estimates that 23,000 metric tons of lithium carbonate can be extracted per year. In addition, the Minem projects Falchani a useful life of 26 years. “There is lithium all over the world, but not from Peru’s concentration of more than 3,000 parts per million. That is a fabulous law and much more than the 500 parts per million that the Bolivian salt flats have. 

In the case of Peruvian lithium, which is in rock and requires another process to extract it, the concentration is up to six times higher. Thus, to the Lithium Triangle, which has considerable reserves, Peru could be added. I see a great future for the project, taking into account that it is an obligation to go towards renewable energies ”, says Rómulo Mucho. Mexico is another country that has been causing people to talk, not only because of its clay-based lithium project located in the state of Sonora and in the hands of the British Bacanora Lithium, but also because of the way in which the government of Andrés Manuel López Obrador wants to manage it. From copying the Bolivian model and taking charge of the entire lithium production chain to the controversial proposal for constitutional reform with which the Mexican president intends to put total control of the electricity sector in the hands of the state Federal Electricity Commission (CFE), disappear regulatory bodies, eliminate permits and guarantee the control of the State over the precious reserves of lithium. This has set off all the alarms of potential investors and even the Mexican Mining Chamber (Camimex) has already warned that this rule would make several projects unviable. The truth is that the lithium project arouses a lot of interest. And it is that Bacanora Lithium has as a joint venture partner Gangfeng Lithium, which owns half of the project and is struggling to get 100%. For now, the Chinese company, which is a Tesla supplier, has already announced that it will build a plant in Sonora to recycle electric car batteries, an important process in the production and adoption of these vehicles in America. And the scenario could not be better for the Sonora lithium project, taking into account the large automotive industry of the North American country and its proximity to the United States, an economy that has been driving the demand for electric cars and that together with Canada have the T-Mec, a commercial agreement that stipulates that 75% of the content used in the The automotive industry must be regional, which encourages investment in this field. “Imitating the Bolivian model or nationalizing lithium is absolutely a political discourse, which has no practical or economic sense. In Bolivia, Evo Morales invested about US $ 500 million to develop lithium batteries. The result is that he created a company that has not sold a single gram of lithium, even though it has one of the largest reserves. This shows that there is a great distance between having reserves and producing them. The national lithium industry has only consumed money. Mexico is probably going to manufacture batteries and electric cars for its main industry, which is led by American companies that have their factories there, ”says Jaime Alée. The political plane could also play against Chile, the second largest lithium producer in the world. 

“In this country we do not know what will happen with the change of the Constitution. Although Chilean production is higher than in Argentina, this country has a larger project portfolio despite its economic and political ups and downs that characterize it. Currently in Argentina there are fewer barriers to investment while Chile demands that companies have to form a joint venture with the national company and give 25% of production, because in this country lithium is considered strategic ”, says Patricia Vásquez. The southern country, whose lithium industry is dominated by companies SQM and Albemarle, knows that it has lost competitiveness in recent years, giving its rivals a certain advantage. In this regard, last week Chile announced an auction process to award operating contracts to explore and produce 400,000 tons of lithium metal for batteries, in an attempt to boost production and meet global demand. “Our country, which until 2012 was the world’s leading lithium producer, was surpassed by Australia and it is expected that by the end of this decade China will displace us to third place,” the Chilean Ministry of Mining and Energy acknowledged in its statement. For Chris Berry, Latin American governments must ensure that they do not “kill the goose that lays the golden eggs” by increasing royalties, taxes or regulations. “They have to strike a balance between allowing companies to operate in the country and doing it in a responsible manner so that all stakeholders can benefit. Chile is rewriting its constitution and the next presidential elections in Brazil are two events to take into account in South America, ”he says.


Source: America Economy

Blinken vows to ‘correct imbalance’ in Washington’s approach to Latin America

Latin America

US secretary of state discusses Washington’s new approach to the region during a short trip to Quito and Bogotá.

US Secretary of State Antony Blinken promised this week to broaden Washington’s relationships beyond security funding in the struggle to promote democracy in Latin America.

Blinken made a three-day visit to the region, meeting a host of conservative leaders.

Colombian President Iván Duque, who has come under fire over a deadly police crackdown on protests, welcomed the top US diplomat at the Casa de Narino palace in Bogotá for two days of talks that will focus on key priorities of US President Joe Biden – climate change and migration.

Blinken will meet ministers from around the region amid a sharp rise in the number of desperate Haitians who are making a long trek from South America to the United States.

Duque was a close ally of former US president Donald Trump and has so far not been able to meet Biden, who faces pressure from left-leaning lawmakers in his Democratic Party to suspend assistance to Colombia on rights grounds.

Colombia for decades has been a top recipient of US military assistance, including in its decade-long campaign against FARC rebels.

In a speech in Ecuador prior to his visit to Colombia, Blinken said that the US record on security assistance in Latin America has been “mixed.”

“That’s because often we tried to fix the problem by relying too much on training and equipping security forces, and too little on the other tools in our kit,” he said at the Universidad San Francisco de Quito, with the green Andean foothills behind him.

“We focused too much on addressing the symptoms of organised crime, like homicides and drug-trafficking, and too little on the root causes. We’re working to correct that imbalance.”

He acknowledged the long shadow of US support for dictators, saying, “There were times when we supported governments in the Americas that did not reflect the choice or the will of their people and did not respect their human rights.”

In a letter to Blinken ahead of his visit to Bogota, Human Rights Watch said that Duque has presided over police brutality “unprecedented in recent Colombian history” with dozens killed this year in a crackdown on major demonstrations over proposed tax reforms.

“A strong public and private response by the Biden administration could help prevent further human rights violations,” wrote the group’s Americas chief, José Miguel Vicanco.

Blinken in his speech said that the United States had tools in addition to security funding. He pointed to the Biden administration’s greater push on fighting corruption, including denying visas to officials involved in graft.

Amazon deforestation pact

Speaking Thursday, Blinken said that the United States will also launch an Amazon-wide regional pact to reduce deforestation, a bid to fight a key factor in climate change.

Washington’s top diplomat said the a “new regional partnership specifically focused on addressing commodity-driven deforestation” would be set up “in the coming days.”

The initiative will “provide actionable information to companies so that they can really reduce their reliance on deforestation,” Blinken said.

He said the pact would also include financial assistance to help manage protected indigenous areas and support the livelihoods of farmers.

Without giving further details, Blinken said he expected the partnership would help preserve 4,500 hectares (11,000 acres) of forest and prevent the emissions of 19 million metric tons of carbon dioxide.

Rainforests are crucial for the environment because they serve as huge carbon sinks, but greenhouse gas emissions from burning and industrial-scale agriculture in the Amazon account for higher total annual emissions than those of Italy or Spain.

By far the largest Amazon nation is Brazil, where President Jair Bolsonaro has championed big agriculture in the forest and has been accused of abetting the killings of environmental defenders.