Caipirinhas and Fintechs

*By Marcelo Carrullo

Fintechs and caipirinha: truly Brazilian.

About two months ago, I was at the international airport in Rio waiting for the final call for the flight back to Boston, a city that I’ve been calling home for years now. Remembering the last winter in the city — when thermometers dropped to an insane 89 F! — and knowing that temperatures were starting to fall considerably, I decided to take a farewell coffee and said to the waiter who kindly offered me the menu: “Strong, black and hot.”

With a solidarity look on his face — it seemed like he knew what I would face when I land — he took the order and, before heading back to the bar, in a language mixture of Carioca and English, said to the client sitting on my side: “Another caipirinha? É pra já, boss!” We laughed, I and the foreigner (apparently a classic Bostonian, considering the RedSox hat and keychain), in that simple way to communicate, and started a pleasant pre-flight conversation.

At some point, speaking like a true pub poet (and how many poets are born in a pub after a third, a fourth, a fifth drink…), that fan of sports, staring intently at his glass, said: “Only in Brazil! There’s no way… only in Brazil will I ever have a caipirinha made with genuine cachaça!” I agreed. “Attention passengers from flight 974 to NY and Boston, now boarding on gate 16…” The loudspeakers called: it was time to go.

Later, sitting in my chair, I read the following piece of news in a Brazilian economy newspaper: “Decree-law facilitates foreign investment in Brazilian Fintechs”. The text explored article 1 of Decree-law number 9.544, from October 29, 2018, issued by the Central Bank, which reads: “It is in the interest of the Brazilian Government the foreign participation, up to one hundred percent, in the equity of Direct Credit Societies and of Loan Companies between people, whose operation is authorized by the Central Bank of Brazil.”

In practice, the decree-law allows Brazilian Fintechs to attract global resources to leverage and implement their aggressive business plans, opening a new horizon for entrepreneurs and for the Brazilian startups in this segment. What a great news! Nothing more appealing to the capital market that the knots are undone and the bilateral investments flow is encouraged — a process that has already begun with CVM Normative Instruction number 578, from 2016, establishing that Brazilian Private Equity Investment Funds (named as FIPs in Brazil) could invest up to 20% of their capital in assets abroad.

On the Brazilian side, the amount of Fintechs proliferating with disruptive ideas, probably most of them based on a learning curve designed by years and years of economic challenges facing by the domestic financial market — 2 or 3 decades ago we were still living in a time of hyperinflation — draws attention to venture capital investments, which from now on, including the foreign capital, will have much more resources available to invest in this segment.

Yes, great news. And how to make this flow come true? How to strongly increase and encourage this two-way street that begins to gain regulatory incentives that effectively help in this process? In our company — where regulation, legislation and compliance are the basis of all financial products and services we provide — we experience in locum our Brazilian clients’ demanding for foreign investment, mainly those who are seeking an international path to grow.

If on the one hand the technology based on artificial intelligence (including learning machine, data analytics, etc.) is increasingly approaching Brazilian Fintechs and international markets (and vice-versa), on the other hand the flow of entrepreneurial capital has always faced regulatory barriers that impede consistent investments between Brazil and other more developed countries with greater availability of resources. I know we have a lot of homework to do, but I am an incorrigible optimist and to me it sounds quite motivating that the Brazilian government is investing in actions that will enable bilateral investments.

I folded the newspaper and, before putting my glasses down for that traditional, and almost mandatory, nap in an 8-9 hours flight, I took another look at the card that the caipirinhas lover gave me: Private Equity Investment Fund. I looked around, and he was still awake, close by. Before he started sleeping, I got up, went to his chair and, motivated by my recent reading, proposed that irresistible invitation, knowing that the creativity of the Brazilian Fintech market is as unique as our national drink: “My friend, the next caipirinha is on me!”

Marcelo Carrullo is an expert in business development with more than 20 years of global experience. He is a team member at Drummond Advisors.

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