How to Invest in Latin America: Considerations for LPs and Strategic Investors

Latin America has quietly become one of the places where venture capital buys the most optionality per dollar invested. The gap between perception and reality is now one of the largest sources of alpha available to international VCs, family offices, LPs and business angels.

While much of the developed world struggles with competitive saturation and demographic aging, the region combines something rare: young markets, rapid digitalization, significantly lower customer acquisition costs, and a generation of founders that is no longer learning from scratch.

The result is uncomfortable for the classic “high risk, uncertain returns” narrative: 44% of Latin American funds sit in the top global quartile for performance (TVPI), and 19% in the top 5%. That is anything but marginal.

Where the Dollar Works Harder

According to Jose Kont, CEO of Cuantico VP, “If you invest one dollar in the Latin American market, the impact is enormous compared to that same dollar in the United States.” This is not regional hype; it describes a quantifiable asymmetry.

In digital marketing, the comparisons are stark: the average customer acquisition cost in Latin America is about $12.26, versus $81.84 in the US/Canada and $46.08 in Europe. With a fixed budget, a brand can buy almost seven times more customers in the region than in North America. In mobile, cost per install is typically between $0.50 and $2.00, roughly 60% lower than in the US.

For an investor or business angel backing a company, this means something very simple: the same capital buys more experiments, more product iterations, and more learning curve. Instead of burning millions just to see if there is traction, a Latin American startup can validate PMF, adjust pricing and build a relevant user base with a fraction of the budget.

On top of the CAC multiplier, there is a demographic context that is hard to ignore. The region has a median age of 31.7 years, with more than 156 million young people between 15 and 29—over a quarter of the total population. While Europe, Japan and even the US worry about who will sustain their pension systems, Latin America still has one or two decades of demographic dividend and consumption growth ahead.

In parallel, digitalization is moving fast: internet penetration jumped from 43% to 78% in just a decade, with countries like Chile already near 90%. Around 79% of the population has a financial account or debit card, and 88% use mobile phones to pay. And yet, roughly 91 million people still lack access to digital financial services, and about 200 million are in early stages of inclusion. The whitespace remains huge.

From Desert to Ecosystem

Fifteen years ago, talking about startups and VC in most Latin American countries sounded almost exotic.

Kont puts it bluntly: “10 or 15 years ago there was nothing—no startups, no funds, no ecosystem; today we are already seeing second generations of founders and funds.”

The first wave—Mercado Libre, Nubank, Rappi, Kavak, Ualá and others—has already stopped being “promise” and turned into economic infrastructure. Mercado Libre closed 2024 with about $21 billion in net revenue (+38% YoY), $51.5 billion in GMV, and its fintech arm (Mercado Pago) generating $8.6 billion in revenue and $197 billion in payment volume. Nubank and Rappi, born as “rebellious” startups, are now corporate reference points in their home markets.

What matters for institutional investors is the dynamic this first wave creates: ex‑Rappi, ex‑Kavak and ex‑Mercado Libre founders building new companies and carrying with them know‑how in hypergrowth, fundraising and regional expansion. That is exactly what turned Silicon Valley into what it is. Latin America is entering that phase.

How Capital Behaves: More Selective, Not Absent

The valuation reset for growth companies and the global venture funding drought of 2022–2023 also hit the region, but did not derail it. In 2024, venture capital deployed around $3.6 billion (equity only) across 694 deals in Latin America. In 2025, total volume grew again by roughly 14%.

In other words, there is no irrational euphoria, but there is no collapse either. Activity has stabilized around $1 billion per quarter since 2022, enough to sustain a healthy pipeline.

The geographic distribution reflects different realities:

• Brazil concentrates the largest share of capital, with about $1.7 billion in fintech alone and hundreds of deals per year.
• Mexico has reclaimed the second spot, supported by nearshoring dynamics and its role as a gateway to the US.
• Argentina, Colombia and Chile complete the primary block, each with its own mix of talent, macro risk and ecosystem sophistication.

Capital has clearly shifted toward more mature companies. Around 65% of deployed money in 2024 went to later‑stage businesses, up from 46% in 2023. The implicit rule is: fewer bets on “PowerPoint stage”, more meaningful checks to teams that have already proven they can execute efficiently.

For LPs, another critical data point: this region is not powered by improvised funds. In 2023, managers raised $10.1 billion across 94 funds, the second‑highest figure on record, and 72% of that capital went to experienced GPs (Fund IV or later). This is not a fashion experiment; it is an asset class in the process of institutionalization.

Fintech as the Region’s Laboratory

If there is one sector that captures both the potential and frictions of Latin America, it is fintech.

In recent years, the number of fintech companies in the region grew by 112% from 2018 to 2021: from 1,170 to 2,482 platforms across roughly 26 countries. Today, Latin American and Caribbean fintechs represent about 22.6% of all fintech platforms worldwide. This is not a niche; it is a meaningful block in the global map.

Most of these companies focus on payments and remittances, digital lending and technology platforms for financial institutions and merchants. The key point, however, is not just quantity but focus: 57% of fintech firms serve unbanked or underbanked populations, up from 42% in 2017. They are not mainly competing for affluent clients with five credit cards; they are building rails from scratch for the people traditional banking ignored.

Meanwhile, regulation advances at very different speeds. Mexico, Chile, Ecuador and Peru already have relatively comprehensive fintech laws, while Brazil leads in open finance and even open insurance frameworks. Yet in much of the region there is still a strong temptation to treat startups as if they were full-fledged banks, with regulatory and capital requirements that do not match their stage of development.

From the perspective of a serious international investor, fintech in Latin America is not a trivial bet. It is a space where the asymmetry between need and supply is enormous, but where execution requires a deep understanding of the regulatory mosaic and a willingness to navigate it with patience.

Real, Not Cosmetic Risk: Politics, Regulation and Culture

Discussing returns without discussing risk in Latin America would be irresponsible.

In surveys of corporates and investors, 84% cite political instability and regulatory changes as the main barrier to investment in the region. Corruption and lack of transparency worry 68% of respondents. Political and regulatory risk is not a footnote; it is part of the design.

Regulatory fragmentation multiplies complexity. Each country has its own KYC and AML rules, licensing regimes, tax systems and corporate structures. What works in Mexico does not automatically work in Colombia; what is allowed in Brazil may be constrained in Peru. On the labor side, there are jurisdictions where dismissing an employee “without cause” can require severance payments approaching twice that person’s annual salary. Currency volatility adds another structural layer of risk: many startups earn revenue in local currency but pay for key services in dollars.

On top of this, the business culture is different from that of the US or Northern Europe. Decisions are usually slower, hierarchies matter more and communication tends to be less direct. The well‑known “20–30 minutes of small talk about family, food, weather or football before getting down to business” is not a productivity bug; it is the local trust‑building mechanism. Ignoring it is a fast track to sabotaging relationships from day one.

Anyone trying to enter the region with the exact same playbook they use in Boston or Berlin—just translated—will burn relationships, time and money.

How to Evaluate Latin American Startups Without Fooling Yourself

Given this mix of potential and complexity, the way investors evaluate companies has to adapt. Kont explains it very clearly: “in early stages, the key factor is not market size or the elegance of the solution, but the team and its ability to attract talent.”

In a region where there are over 1 million IT professionals, with around 759,000 developers in Brazil alone—one of the largest pools in the world—yet 65% of Mexican firms report talent shortages and similar deficits exist in other countries, a founder’s real competitive advantage is persuading highly sought‑after people to bet their careers on a new project.

For a foreign investor, it makes more sense to ask:

• Who has this team actually convinced to join, and where are those people coming from?
• How long have the co‑founders worked together, and what have they built before—even outside the startup world?
• Who is willing to leave a Nubank, a Mercado Libre or a Rappi to work with them?

The other common trap is premature “go global”. Kont sees it constantly: founders raising capital with a pitch to “open Mexico”, “enter Brazil” or “expand to the US” when they do not even have clear product‑market fit at home. Scaling at that stage is not ambition; it is layering regulatory, cultural, currency and operational complexity onto a model that is still unproven.

In Latin America, where each border changes the rules, attempting a copy‑paste of the same product without adjustments is particularly dangerous. The companies that perform best tend to first consolidate a robust PMF in their domestic market, and only then pursue selective expansion with real adaptations in product, pricing, channels and operations.

The market no longer rewards “growth at all costs”. Capital now flows to businesses that can demonstrate capital efficiency, moderate burn, healthy unit economics and a credible path to profitability.

Where It Makes the Most Sense to Look for Opportunities Now

The sector map sends clear signals.

Fintech remains the main magnet for capital, concentrating around 60% of VC investment in some recent years, driven by the combination of massive smartphone penetration, underbanking and evolving regulatory frameworks. This is not limited to neobanks; it includes cross‑border payment infrastructure, alternative credit for informal businesses and B2B tools for incumbents.

At the same time, enterprise software and IT services already account for roughly 36% of deployed capital. The second generation of founders is applying AI, automation and SaaS products to deeply Latin American problems: informal supply chains, messy payment reconciliation, mass education in Spanish and Portuguese, and healthcare in rural and peri‑urban areas.

E‑commerce already surpasses $100 billion in value and is projected to double, with countries like Argentina and Colombia among the fastest‑growing markets globally. Healthtech and edtech provide concrete evidence of traction, through companies like Osana or regional platforms such as Edtools, which combine accessibility with AI tailored to local inefficiencies.

In sustainability, ESG is no longer just an aspirational conversation; it is backed by hard numbers. ESG investment in the region could grow from $1.79 billion to $4.54 billion by 2030, with a CAGR close to 18%. For LPs and family offices with impact mandates, there are few places that offer a similar combination of social need, regulatory pressure and return potential.

What VCs, LPs and Business Angels Should Do Now

The conclusion is straightforward: Latin America can no longer be ignored without incurring opportunity cost. The dilemma is not whether the region has potential; it is whether the investor is willing to invest in understanding it.

To tap into that potential without crashing, several moves are almost mandatory:

1. First, stop thinking of “LatAm” as a single homogeneous block and design distinct strategies for Brazil, Mexico, the Southern Cone, the Andean region and Central America. Each has its own rules, speeds and risk‑reward profile.
2. Second, do not go in alone. Co‑invest with local funds, work with lawyers and tax advisors in each jurisdiction, and bring on venture partners who have actually operated in the region. Occasional trips and desk research are not a substitute for this.
3. Third, adjust the evaluation filter. Give more weight to team quality and talent attraction than to the perfect pitch deck. Demand clear local PMF before applauding regional expansion plans. Scrutinize unit economics and capital efficiency.
4. Fourth, accept somewhat longer liquidity horizons, and complement equity with tools like venture debt and secondary markets to manage exit risk.
5. Fifth—and perhaps most uncomfortable—adapt the relationship style. Allow meetings to begin by talking about family and football; recognize that in many cases a Latin American “yes” means “yes, but with nuance”; and assume that trust is built at a different pace.

The underlying question is no longer whether Latin America is “worth it”. Data on returns, costs, demographics and digitalization answer that comfortably. The real question for a sophisticated investor is this:

Is there a willingness to do the work required to capture that asymmetry—or will others be allowed to keep the most interesting part of this cycle?

Analysis based on an interview with Jose Kont, CEO of Cuantico VP, on the Ivy Podcast.