Spike in interest rates being blamed

Durrant Pate/Contributor

There has been a marked decline in venture capital investments in Latin America, which is a cause for concern for governments in the region,

Latin America received barely US$3.4 billion in venture capital during the first quarter of this year, down 30 per cent from the previous quarter. This is the third consecutive quarter of decline in venture capital investment in the region.

Interestingly, only a few months ago was declared the world’s “fastest-growing” venture capital investment destination. Nearshore Americas reports that venture capitalists poured as much as US$19 billion into Latin American start-ups in 2021, creating nearly 30 unicorns.

Brazil and Mexico alone counted 25 unicorns between them, according to Crunchbase data. Crunchbase is a platform for finding business information about private and public companies

Steady decline in venture capital investments

However, in recent months, there has been a steady decline in both volumes of investment as well as the number of funding rounds. This has been blamed on interest rate spikes in the United States following a steep climb in inflation.

In addition, political uncertainty, tightening of monetary policy in the US and a weak initial public offer (IPO) environment were cited as contributory factors damping investors’ sentiment, leading to venture capital drying up in Latin America. Nearshore Americas quoted Crunchbase as reporting that seed and angel investments are roughly in power with the previous two quarters.

Some unicorns, such as Mexico’s used-car seller Kavak and cryptocurrency exchange Bitso, are likely to postpone their pending IPOs.