VWB #9: Davos Divided: LATAM Leaders Clash + a New Way to Invest in Bitcoin?

Happy Thursday!

This week in VWB, we dive into the World Economic Forum taking place in Davos, where Latin American leaders are clashing over taxation policy, climate change projects, and political ideologies in the region. Notably, yesterday’s video from Milei accusing Davos of promoting a socialist agenda has added spice to the discussions. As global leaders convene in Switzerland this week to ‘rebuild trust’, we explore the opportunities and challenges emerging as Latin America asserts itself as a global hub for innovation and sustainability, amidst persisting security and policy tensions. 

Also in the news, we plunge into the SEC’s groundbreaking approval of Bitcoin ETFs and discuss its significance for the crypto industry and retail investors. At VWB, we are keenly interested in following the impact these policies will have upon industry leaders like Coinbase, as well as upon the legitimacy of crypto as a recognized security. Here’s a question for our readers this week: are you ready to dive deeper into Bitcoin investing now?

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News Spotlight 🔎

Davos 🇨🇭

This week, the World Economic Forum is taking place once again in Davos. In a summit where government and business leaders discuss policies and investment opportunities, the attendees this year feature an interesting Latin American twist. The leftist agendas of Colombian President Gustavo Petro and Brazilian President Luiz Inacio Lula da Silva stand in stark contrast to the staunch right-wing stance of Argentina's President Javier Milei. As discussions unfold amidst the alpine surroundings, government officials, investors and tech leaders will need to grapple with conflicting regional agendas, and navigate a unique blend of opportunities and challenges in the dynamic landscape of Latin American development. 

For more reading on Milei’s electoral victory, the LATAM climate transition, and a deep-dive into a leading climate tech startup, check out our VWB issue #4!

Taxes and Climate vs. Free Markets and Libertarianism

One prominent point of contention for Latin American leaders at Davos revolves around taxation policies and climate change initiatives in the region. During their speeches at the summit, Petro and Lula da Silva reiterated their goals to reduce taxes on low-income residents while increasing levies on multinational corporations operating in the region, surpassing the 15% threshold set by the 2021 OECD deal. Last summer the leaders organized the first Latin American and Caribbean Tax Summit, where Ministers of Finance and Economy from 16 LATAM nations convened to align policies on issues including taxation for digital corporations and combating tax havens. 

Similarly, the two leaders and their teams emphasized the region's commitment to renewable energy, and highlighted opportunities for future clean energy infrastructure investments in Latin America. Indeed, the international community should take note of the region’s progress in adopting clean energy, as it currently stands at twice the global average, according to the Inter-American Development Bank. In recent Davos summits, Colombia, Costa Rica, Brazil and the Dominican Republic have highlighted investment for green opportunities in the region–notably, building a clean energy grid across the region and revitalizing the Amazon rainforest.

On the opposite end, Milei used his presence at Davos to criticize the event as a platform with a "socialist agenda." In his speech, he fervently advocated for free markets, dismissed climate change, and championed spending cuts and deregulation in Argentina. He also seized the occasion to discredit left-wing administrations in the region, as well as the ‘Western world’, emphasizing that “the state is not the solution, the state is the problem.” Despite facing legal hurdles and staunch opposition from trade unions, Milei has garnered significant international attention. According to his account, he has received an impressive 60 requests for bilateral meetings during his Davos visit.

Our Translation: Is Davos rebuilding trust? 🕵️

Certainly, the conversation on tax reforms and climate change transcends Latin American sentiments at Davos. In an open letter coinciding with the event, several billionaires advocated for increased taxes on the super-rich, underscoring the impact of inequality on global stability. Shockingly, recent polls reveal that 74% of G20 super-rich individuals support higher taxes to address living costs and enhance public services. On the climate change topic, US Climate Envoy John Kerry took great pains to defend the latest COP28 summit held in the UAE, a leading petrostate. Despite Kerry applauding the UAE's renewable energy initiatives, climate activists–including Greta Thunberg–decried the choice as a "huge conflict of interest" during their speech at Davos.

However, the key takeaway regarding Latin America is that the region is facing a striking dichotomy. With the election of Milei, Latin America is currently facing the most vocal opposition to the "pink tide" administrations, even as it emerges as a leader in renewable energy and food security. As Davos is making clear this week, the imperative for investment in the region to support the global food chain and facilitate the energy transition is growing. However, the investment landscape seems to also be marred by persistent regional disagreements, in addition to the enduring challenges of organized crime, corruption, and insecurity. 

At VWB we recognize that the geopolitical and economic situation in Latin America demands that international officials, investors, and tech leaders navigate market unpredictability and instability as they conduct business in the region. While these challenges aren’t new, the stakes are higher, and will continue to grow in the coming years. Nonetheless, there is a compelling opportunity to capitalize on the region's rising role as a global innovation and trading hub–and we celebrate that world leaders at Davos are paying attention.

Also in the News 🗞️

ABCD(ETF): Bitcoin Investing Goes Mainstream

The US Securities and Exchange Commission (SEC) approved several bitcoin ETFs last week in what analysts are calling a watershed moment for the crypto industry. The SEC has long been wary of cryptocurrency, and, according to its chair Gary Gensler, this approval is not a widespread endorsement of crypto as a security. With that being said, investors seem to be very enthused about the new opportunity to invest in Bitcoin on more traditional exchanges. In the first week of trading, the 11 approved Bitcoin ETFs traded with a cumulative volume of $11.1 billion. Additionally, BlackRock’s iShares Bitcoin ETF has now reached $1 billion in AUM, with 99% of its portfolio being Bitcoin.

Our Translation 🕵️

The approval of Bitcoin ETFs is an exciting opportunity for investors, particularly retail investors looking for crypto exposure but without the risk or complexity of investing directly in cryptocurrency assets themselves. Even though the SEC has been actively trying to message the opposite, the approval of these ETFs also offers an air of legitimacy to crypto as a legitimized security. As a startup-focused newsletter, we at VWB are most interested in this story in relation to crypto-related companies and how they will fare in the wake of this news. Most specifically, VC darlings like Coinbase.

Investing in Bitcoin prior to these ETFs was complicated and, to the average investor, seemed like something akin to operating in the Dark Web. Furthermore, the volatility of the assets coupled with numerous hacking incidents relegated Bitcoin and other crypto assets to a relatively small community of investors. Coinbase and other exchanges changed all of this by making crypto seemingly safe, easy, and accessible. For many curious investors, Coinbase was their entryway to these assets. Now, though, with crypto ETFs trading on more traditional exchanges, we are interested in monitoring the trading volume, health, and revenue of exchanges such as Coinbase. Especially with the FTX catastrophe still fresh in the collective consciousness, will the average investor look to Bitcoin exposure in traditional markets versus investing directly in the asset?

As always, thank you for reading and we would love to hear from you! Feel free to respond directly to this email or engage with us on Twitter.

See you next week,

Paula and James