Ecosystem Deep Dives #15: Mexico - Open the floodgates
Owing to a confluence of geographical, economic, and demographic factors, Mexico's start-up ecosystem is one of the protagonists of LATAM's start-up boom.
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The recent boom of Mexico’s start-up sector is inextricably linked to the growth of LATAM’s start-up ecosystem as a whole. While big names such as Soft Bank, Sequoia, Y-Combinator and 500 Global have recently made a splash in LATAM’s ecosystem, start-ups and investors in the region have been building their ecosystem for the past decade. The rise in foreign interest in LATAM start-ups can be attributed to two main factors:
Increased LATAM start-up performance due to rapidly rising adoption of digital services in light of Covid.
The American Federal Reserve’s aggressive monetary policy, which injected excess liquidity in the market and empowered investors to take more risks + low interest rates that made investing in treasury bonds less attractive.
The impressive growth numbers posted by LATAM start-ups in recent years can also be attributed to the dichotomy between the number of people with access to the internet compared to the number of people with access to digital services.
In Mexico for example, while 91 million people have access to the internet, only 47 million people have bank accounts. This gap represents an incredible opportunity for fintechs, and explains why most start-up giants in emerging markets operate in the financial service area. The non-competitive and non-inclusive local banking sector, dominated by BBVA and Citibanamex, also contributes to strengthening the appeal for disruptive fintechs. Edtech, healthtech and e-commerce are other sectors taking advantage of the divide between internet users and digital service availability.