New York, NY – Despite the US economic slowdown and turmoil in global credit markets, key Latin American economies and exchanges continue to perform well, and private equity and venture capital investment in the region has increased seven-fold since 2005.
A new generation of market-oriented political leaders in countries like Brazil, Colombia, Mexico and Peru are passing reforms to improve investment environments for local and global firms. According to the Latin American Venture Capital Association (LAVCA), they are making important progress.
LAVCA’s 2008 Annual Scorecard on the Private Equity and Venture Capital Environment in Latin America, released today, indicates that Brazil is setting the pace of change with a raft of initiatives that have had a major impact on the country’s business climate.
LAVCA’s Scorecard ranks 13 countries on capital markets development, tax treatment, minority shareholder rights, bankruptcy regulation and nine other indicators affecting venture capital and private equity firms in the region.
The Scorecard shows a trend toward favorable reforms in score gains for 12 of the 13 Latin American and Caribbean (LAC) nations ranked. The 2008 Scorecard was prepared by the Economist Intelligence Unit (EIU).
“Our 3rd Annual Scorecard shows momentum across the region,” said LAVCA Chairman Eduardo Elejalde, Founding Partner of Latin America Enterprise Fund Managers. “Yet it also shows that much room remains to improve local investment frameworks.“
Scorecard highlights include a ten-point score jump for Brazil, reflecting a year of buoyant capital markets and local pension fund PE/VC activity, as well as top marks for four nations in a new category, entrepreneurship. In Colombia and Peru, where regulators have adopted the LAVCA Scorecard as a guide for reform efforts, scores improved dramatically over 2007.
“The LAVCA Scorecard has become a highly effective benchmark for MIF projects including Brazil’s Programa INOVAR, Peru’s Programa Invertir, Colombia Capital and Finbatec, and AMEXCAP in Mexico,” said Susana Garcia-Robles, Senior Investment Officer with the Inter-American Bank’s Multilateral Investment Fund.
“With 60% of IBM’s income generated outside the U.S., IBM sees emerging markets as fertile ground not only for partnering with companies, but for new sources of technological excellence and innovation,” said Claudia Fan Munce, Managing Director of IBM’s Venture Capital Group and LAVCA Board Member. “The LAVCA Scorecard is a great tool for navigating these markets in Latin America.”
According to LAVCA special policy advisors Francisco Gil Diaz, former Finance Minister of Mexico and current head of Telefonica for Mexico and Central America, and Gustavo Franco, former Central Bank governor of Brazil and founding partner of Rio Bravo Investimentos, the LAVCA Scorecard addresses a crucial information gap for both policymakers and investors in the region
“There is a glaring need for venture capital in Latin America and LAVCA attempts to fill the void,” said Mr. Gil Diaz. “The Scorecard’s analysis of the market and regulatory environment is an excellent source for investors and a useful guide for policymakers.”
According to Mr. Franco, international standards are crucial to allow capital to flow seamlessly across the globe.
“For venture capital to become a global activity, specific metrics are needed for international comparisons,” he said. “The LAVCA Scorecard is a very important initiative on that particular front and is bound to become an essential tool not only to direct the attention of investors, but also to foster healthy competition among destinations and to guide regulatory and policy efforts.”