(Dow Jones) The steady drumbeat of civil unrest that continues in Brazil may actually be good for the country’s economic and political fortunes, say some investors in the region.
International private equity firms that focus on the country said Brazil’s protest movement will actually improve its long-term investment environment.
“These protests, although they may scare some international investors in the short term, are good for the country and good for private equity,” said Gonzalo Fernandez Castro, head of Latin America private equity at Partners GroupPGHN.EB +0.16%. “It’s the middle class people asking the government to do its job – it’s not the Arab Spring.”
Confidence in the Brazilian economy has fallen after years of growth during the economic downturn which inhibited developed markets.
According to one international investor active in Brazil, his firm remains interested in the country despite rising inflation and only 2% annual projected gross domestic product growth. Though relatively anemic, that number is higher than the 0.9% annual growth the country experienced in 2012, the investor added.
“As long as you stick to the sectors that are fast growing, there are opportunities in Brazil, but the overall macro opportunity is a challenge,” the investor said.
Beyond the country’s economic woes, systemic corruption and insufficient infrastructure and public services have been problems that have gone largely unaddressed in the nation – until now.
“This was a wake-up call for politicians, especially with regard to corruption and public services,” said one investor with an international investment firm that is active in Brazil.
Firms including 3i Group are increasing their commitments to the region. Since Brazil comprises 50% of the GDP for all of Latin America, it makes sense to invest in the country rather than look elsewhere in the region, said Marcelo Di Lorenzo, a managing director and head of 3i Brazil.
Brazil also offers better exit opportunities than other countries in Latin America because of the size of its economy, Mr. Di Lorenzo said. Because it’s such a large market, strategic acquirers are willing to look at companies in the region as viable acquisition targets, while larger companies in smaller countries may not attract the same attention, he said.
H.I.G. Capital is another global investor that has warmed to investments in Brazil. As the protests continued through July, the firm made two investments in the country – backing ice cream store Creme Mel Sorvetes and human resource software developer LG Sistemas.