Latin America and Southeast Asia, home to over one billion people, are on the brink of redefining global economic landscapes. With rising investments, infrastructure development, and digital transformation, these regions are set to shape the future of trade, finance, and economic growth, though challenges remain in terms of financial fragmentation and regulatory hurdles.
MALAYSIA, 28 APRIL 2025 – According to a report by Valor Capital Group and Credit Saison, Latin America (LATAM) and Southeast Asia (SEA) are emerging as critical global economic players. Despite their growing investments in infrastructure and digital finance, both regions still face substantial challenges in terms of financial inefficiency and regulatory barriers.
The Report’s Key Findings:
- Global Economic Shift: Latin America and Southeast Asia are quickly becoming economic powerhouses, poised to influence global trade and finance. However, despite their growth, these regions remain financially fragmented, limiting credit access and stalling commercial integration.
- Call for Investment in Digital Finance: The report emphasizes the need for deeper investments in digital finance, cross-border collaboration, and blockchain. It highlights the potential of these regions to reshape global markets but stresses that financial integration and regulatory modernization are vital for continued growth.
Bruno Batavia, Director of Emerging Tech at Valor Capital, noted, “Latin America and Southeast Asia are no longer just emerging markets; they are defining the future of digital finance, trade, and economic collaboration.”
Challenges Facing SMEs in LATAM and SEA:
- LATAM: 87% of financing needs for small and medium-sized enterprises (SMEs) remain unmet, creating a $1.4 trillion financing gap.
- SEA: 51% of micro, small, and medium enterprises (MSMEs) struggle to access financial services, with a $272 billion deficit.
The primary barrier is the outdated credit assessment systems used by traditional banking models, which fail to keep pace with demand, hindering business growth.
Financial Fragmentation and Cross-Border Payment Issues:
The report also points out the inefficiencies in cross-border payments, particularly high remittance fees in both regions. At an average of 6.1%, the cost is over double the United Nations’ SDG target of 3%. This results in a staggering annual cost of $7 billion for consumers, further limiting financial mobility.
In addition, international payments can take up to five business days to settle, which hampers the efficiency of global trade networks and exacerbates financial fragmentation.
Fintech and Venture Capital: A Source of Change:
In response to these challenges, fintech innovation and venture capital have emerged as key catalysts for growth. Southeast Asia saw the creation of 151 new venture capital funds in 2021, while Latin America experienced significant growth in funding rounds, increasing the region’s appeal to global investors.
Noteworthy examples include:
- Visa’s $1 billion acquisition of Brazilian fintech Pismo.
- TikTok’s $1.5 billion investment in Indonesia’s Tokopedia.
- PropertyGuru’s $1.1 billion acquisition in Southeast Asia.
These investments signal strong investor confidence and highlight the rapidly evolving financial ecosystem.
Local Challenges in LATAM and SEA:
Despite the growing fintech scene, certain regional challenges persist:
- Brazil: The country’s complex currency exchange system, with over 100 transaction codes, creates operational inefficiencies.
- Mexico: The lack of local debt funds forces fintech startups to rely on equity financing, limiting scalability.
Qin En Looi, Partner at Saison Capital, explained, “Through our experiences as an operator in global markets with steep Japanese heritage, partnerships and knowledge exchange are critical to navigating and adapting to local nuances and forming successful strategies in the market.”
Unlocking Growth: A Path Forward
Both regions possess immense growth potential but require a concerted effort to overcome regulatory barriers, streamline financial systems, and foster cross-border collaboration. The next decade will be crucial in determining whether LATAM and SEA can fully integrate into the global economy, leveraging their strengths in fintech, digital finance, and regional partnerships.
