Brazil Breeds a New Kind of Billionaire
(Bloomberg Opinion) -- Some new Brazilian names have joined the global superrich, and their ascent to fortune amid bleak times is a tale of a nation in transition. Yes, Brazil’s legacy wealth has left its mark: Banker Joseph Safra died last year, leaving a $17.6 billion nest egg and making billionaires of his four heirs. Now the Safras have company. A crop of geeks, web warriors and data-driven innovators figures among the global list of moneyed newcomers. They’ve made a killing, but also hacked some vexing problems on the way up, and Brazilians are better for the disruption.
Wonks, pundits and money wizards have long speculated or swooned over how the mojo of the market would reinvent this lopsided South American giant from the bottom up. With Brazil’s eyesore income inequality rates and capitalism for cronies, the revolution was never going to be easy. But a reboot may already be at hand.
While the Safras came into wealth the old way — from peddling gold for the Ottoman empire to pampering Brazillionaires — the new faces at the top are part of an emerging economy built on digital technology and fueled by customers from the neglected classes, with a push from the pandemic and overdue policy reforms.
Retailers have deployed apps and algorithms to propel their wares beyond store walls. Honors to Magazine Luiza SA, the popular mega retailer whose robust e-commerce platform, Magalu Marketplace, has propelled the brand into the headlines — and the controlling Trajano family into the billionaire’s club; online sales soared during the pandemic and now represent nearly 69% of earnings.
Guilherme Benchimol turned a wobbly early career (he was fired once, demoted another time, and exiled to a financial backwater) and an iffy 2001 startup into XP Inc, now Brazil’s biggest brokerage house and a buzzkill for legacy banks with their hefty fees and stodgy service. With traditional wealth managers bee-lining to the penthouse, Benchimol went down market, aggressively courting middle-class clients who had scant savings and scanter hope of getting past the gilded doors of top financial houses. XP’s December 2019 IPO put his firm — 436 billion reals ($81 billion) in assets and 2.3 million clients — into the financial frontlines and Benchimol’s net worth into 10 figures. Now, age 44, he’s stepping aside in favor of his 36-year-old tech chief.
Add to that select demographic the partners of Stone Pagamentos SA, a digital payments business, whose cloud based platform helped bust up the club of middlemen who hogged credit card and debit card payments processing. A darling of tech investors, the company became a unicorn in 2018, with a $1.5 billion IPO.
Perhaps the biggest winners of Brazil’s emerging popular economy are the multiplying plenitude of web-only banks that are drawing customers away from traditional lenders. Last year, dozens of digital banks (Brazil has more than 770 fintechs) logged 67 million new accounts. Some clients hail from the unbanked, but most are converts from traditional lenders, frustrated over steep fees, impersonal service and standing in line at the branch. None has done better at poaching this migrant clientele than Sao Paulo-based Nubank, which boasts better than 35 million clients, more than Banco Santander, and accounted for 15% of all banking transfers in December, more than Brazil’s number two lender Bradesco. Unsurprisingly, Nubank’s CEO, Colombian-born David Velez, has also joined the Brazilian billionaires’ club.
Upstarts and disruptors help drive innovation. But they need backup from regulators. “It’s no use having just the technology,” Bruno Diniz, a fintech expert at Spiralem Innovation Consulting, told me. “The financial market needs rules to allow changes.” Fortunately, Brazil’s Central Bank is run by Roberto Campos Neto, who in the spirit of his independent-minded predecessors has navigated around Brasilia’s policy sinkhole to streamline rules and scuttle barriers to enterprise.
One innovation is open banking, a data-sharing arrangement between lenders to help clients compare financial services, so enhancing market competition. Another is the “regulatory sandbox” which creates a safe space for testing untried business models yet to be licensed. Brazil’s instant payments policy led to PIX, a no-fee payment app — allowing real-time money swaps at the tap of a touchscreen — that in just six months has already eclipsed conventional, fee-based bank wires. “With these regulatory initiatives, we are going to see new financial players and more economic inclusion,” said Diniz.
A broader base of customers means a healthier economy. Driven by low interest rates, piddling returns on conventional savings and a bad case of pandemic-induced cabin fever that left people alone with their screens, a million first-time investors hit the Brazilian bourse last year. Once neglected by stock jockeys, these low-roller investors are now a prized fintech clientele. “Countries with big inequality rates are market opportunities,” said Diniz.
It also means a different brand of rich folks. “For many years, Brazilian wealth flowed to traditional sectors in banking, agribusiness and manufacturing, often with the help of government protection and soft loans,” said Adriana Dupita of Bloomberg Economics. “When you apply technological advances, you get a smarter and more creative economy. Fintechs help break down barriers and that opens the way for new wealth.”
Predictably perhaps, Brazil’s nouveau billionaires come with a new cant for changing times. Call it largesse oblige. Young comers in tech-based finance are now ubiquitous on YouTube and Instagram, flogging themes like “How do rich people think?” or “Five steps to end self-sabotage and make money in 2021.” After XP’s blockbuster IPO, CEO Benchimol wrote to clients telling them, “We will not rest until we completely transform the Brazilian financial system and improve people’s lives.” For its part, the Sao Paulo-based start-up and current investor crush Mottu, which rents motorcycles to low-income couriers in the gig economy, claims to be all “serving the underserved.”
Good intentions and fancy tech ginned up by a different bunch of rich guys may not amount to an imminent revolution. But it beats standing in line at the bank.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Mac Margolis is a Bloomberg Opinion columnist covering Latin and South America. He was a reporter for Newsweek and is the author of “The Last New World: The Conquest of the Amazon Frontier.”
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