By Guillermo Parra-Bernal
Tuesday, April 13, 2010 – Private equity investments in Latin America likely will rise to a three-year high in 2010 as the region’s resilient economies continue to grow, luring more risk-prone global investors, the head of an industry association said in an interview on Tuesday.
Deals and fund-raising will probably rise to levels not seen since 2007, when ample global liquidity and a commodity-driven boom led investors to pour more money into emerging markets, said Cate Ambrose, president of New York-based Latin American Venture Capital Association, known as Lavca.
Ambrose said private equity remained strong in 2009, despite an overall decrease in fund-raising and deals reported in the region. Last year, funds raised $3.63 billion from investors, a tumble of 43 percent from 2008, while investments fell 29 percent to $3.27 billion.
“This could be an excellent year for deals because international investors are looking for increased exposure to Latin America,” Ambrose said.
In Brazil, opportunities are in the consumer and industrial sectors as wages climb and companies are not highly leveraged, she noted. Education, health and housing and mortgage investments could also be the target of private equity money in Chile, Colombia, Mexico and Peru, Ambrose said.
She said global giants including Blackstone Group , the world’s largest buyout firm, and Kohlberg Kravis Roberts & Co are rushing to raise funds and seal deals in Latin countries outside Brazil.
U.S.-based buyout firms have been increasingly looking further afield for investment opportunities to offset losses incurred when credit markets seized up late in 2008. Leveraged buyouts, which for years propelled growth in the industry, practically evaporated as access to bond, loan and securitization markets collapsed.
Brazil made up for 45 percent of private equity investments in Latin America last year, compared with Mexico’s 14 percent, Argentina’s 9 percent and Colombia’s 6 percent, Lavca data showed.
Colombia, Chile and Peru, she added, offer buyout firms less regulatory leashes and high returns. Unloading their stakes through a sale to strategic investors remains the best exit option in those markets, she said.
Exits, which fell 30 percent in 2009 to $1.78 billion in the region, will probably recover, Ambrose said. As initial public offerings in Brazil are clogged, partly because of a glut of new stock in the market, other countries such as Mexico are bouncing back.
“We won’t see another IPO year like 2007; and even as it can be very difficult to predict exits in this environment, conventional exits, such as sales to strategic investors or mergers and acquisitions, shouldn’t be a problem,” she said.